Should Self-Employed Borrowers Break Mortgage Before Renewal?

If you’re self-employed and your mortgage renewal is coming up, you might be wondering…

Should you just wait it out?

Or does it actually make sense to break mortgage before renewal and move early?

Most people assume breaking a mortgage is a bad idea. But that’s not always true — especially if you’re self-employed and your current payments are barely touching your principal.

Let’s break it down in simple terms.

When Does It Make Financial Sense to Break Mortgage Before Renewal?

Breaking your mortgage early can make sense when:

1. You’re Paying Mostly Interest

If you’re in a high variable rate right now, chances are a large chunk of your payment is going toward interest. That means your balance isn’t shrinking the way it should.

Switching early to a lower rate can:

• Reduce your monthly payment

• Increase the portion going to principal

• Save you thousands over the next few years

2. Rates Have Improved Since You Signed

If you locked in during a high-rate environment and better options are available now, waiting for renewal could cost you money every month.

3. Your Income Situation Has Changed

For self-employed borrowers, income can fluctuate year to year. If you’re currently showing strong income on paper, this might be the perfect time to refinance — instead of waiting and risking a lower qualifying income later.

This is one of the biggest reasons some clients decide to break mortgage before renewal — timing matters when you're self-employed.

How Cash-Back Offers Help When You Break Mortgage Before Renewal

Here’s what most banks don’t advertise loudly:

Many lenders offer cash-back incentives when you switch.

Depending on the mortgage size, you might see:

• $2,000

• $3,000

• Even $4,000+

That money can go directly toward:

• Covering your 3-month interest penalty

• Legal fees

• Appraisal costs

In some cases, the cash-back fully offsets the penalty — meaning the move costs you little to nothing out of pocket.

And if your new rate saves you $300–$500 per month?

You’re ahead almost immediately.

Real Numbers Example: Does It Make Sense to Break Mortgage Before Renewal?

Let’s look at a simple scenario.

• Mortgage balance: $600,000

• Current variable rate: 6.25%

• Payment: $3,950/month

• Portion going to principal: ~$800

Now let’s say you switch to:

• New 3-year fixed: 4.99%

• New payment: $3,500/month

• Portion going to principal: ~$1,400

That’s:

• $450/month savings

• $600 more going toward principal each month

  
  

Penalty to break: $9,000 (3 months interest)Cash-back from new lender: $3,000

Net cost: $6,000

Monthly savings: $450

You recover that cost in about 13 months.

After that? Pure savings.

And you’ve accelerated your principal paydown the entire time.

This is why sometimes it absolutely makes sense to break mortgage before renewal — especially if you're sitting in a high-rate product.

What Self-Employed Borrowers Need to Be Careful Of

Before making the move, you need to consider:

• How your income is being qualified (T1 generals vs. stated income)

• Debt ratios after any consolidation

• Whether your lender charges IRD penalties (these can be much higher than 3 months interest)

• 
  

This is not a “call the bank and guess” situation.

Self-employed files require strategy.

Final Thoughts

Breaking early isn’t for everyone.

But blindly accepting your lender’s renewal offer can cost you way more than a penalty ever would.

If you’re self-employed and wondering whether to break mortgage before renewal, run the numbers properly.

Sometimes waiting costs more than moving.

And sometimes, moving early is the smartest financial decision you’ll make this year.

Not sure if you should break your mortgage before renewal?

Don’t guess.

Call me directly and let’s run the numbers together. I’ll tell you straight up if it makes sense — and if it doesn’t, I’ll tell you that too.

📞 Give me a call and let’s figure it out.