Calculator
What does a rate difference cost?
Two offers a quarter-point apart can look identical. This calculator turns the gap into dollars: the extra payment, the extra interest over the term, and for mortgages the extra balance you carry into renewal.
Extra interest over 5 yr
$7,191
0.30% gap
Payment gap
$84
per month
Balance gap at term end
$2,154
carried into renewal
| Gap above rate B | Rate | Extra interest | Extra per month |
|---|---|---|---|
| 0.10 points | 4.59% | $2,395 | $28 |
| 0.25 points | 4.74% | $5,992 | $70 |
| 0.50 points | 4.99% | $11,994 | $141 |
| 1.00 points | 5.49% | $24,029 | $284 |
Mortgages: fixed rates compound semi-annually, monthly payments, payment fixed for the amortization. Loans: monthly compounding, repaid over the years chosen. Revolving: interest-only on a constant balance.
How it works
- Mortgages use semi-annual compounding (the Canadian convention for fixed rates) with a payment fixed for the whole amortization.
- Loans are repaid in equal monthly payments over the years you choose.
- Revolving balances are treated as interest-only on a constant balance.
- The table shows what each additional gap above rate B would cost on the same numbers.
Questions people ask
Why does a small rate gap cost so much on a mortgage?
Because the balance is large and interest is charged on it every month. Even a quarter point on several hundred thousand dollars adds up over a five-year term.
Does the cost stop at the end of the term?
No. A higher rate also leaves a slightly higher balance at renewal, which you keep paying interest on afterwards.
Can I use this for a renewal offer?
Yes. Put your renewal offer as rate A and a competing quote as rate B, then use the renewal switch calculator to include switching costs.