Mortgage refinance in Canada
Refinance your mortgage to access equity, lower your rate, or consolidate high-interest debt into one manageable payment.
Start refinancing →What is a mortgage refinance?
A mortgage refinance replaces your current mortgage with a new one, usually to get a better rate, take out equity as cash, or roll high-interest debt into a lower-rate loan. Unlike a renewal, refinancing usually happens before your term ends, which means paying a penalty to break your existing contract.
Whether it's worth it depends on the size of the penalty versus your savings over the remaining term. Use our mortgage calculators to run the numbers before you commit.
- You can typically borrow up to 80% of your home's appraised value when refinancing.
- Breaking your mortgage mid-term usually triggers a prepayment penalty.
- Refinancing requires you to pass the mortgage stress test again, even if you already qualified once.
80%
Max LTV for refinance
3mo–IRD
Typical penalty formula
2–4 wks
Typical timeline
65+
Lenders compared
Your refinancing options
Take out equity as a loan
Use the equity in your home to borrow money for renovations, debt payout, or a down payment on an investment property.
Home equity line of credit
Set up a HELOC for flexible cash access at a reduced rate compared to other financial products.
Finance a renovation
Use your home equity to fund kitchen upgrades, bathroom renovations, new floors, or a finished basement.
Break-the-term refinance vs. refinancing at renewal
There are two very different ways to refinance. At renewal, your term is ending anyway, so you can switch lenders, change your amortization, or take out equity with no penalty — you just need to time your application before your maturity date. Breaking your term early means paying out a live mortgage contract before it matures, which almost always triggers a prepayment penalty from your current lender.
If your renewal is within 120 days, it's usually cheaper to wait and refinance at that point. Read more in our renewal guide.
Prepayment penalties: 3 months' interest vs. IRD
Variable-rate mortgages usually charge a penalty of three months' interest. Fixed-rate mortgages charge the greater of three months' interest or the interest rate differential (IRD) — the difference between your contract rate and the lender's current posted rate for a term similar to your remaining time left, applied to your outstanding balance.
Worked example: 3 months' interest vs. IRD
Balance: $400,000. Contract rate: 5.5%. Two years left on a 5-year fixed. Current comparable rate: 4.5%.
Three months' interest: $400,000 × 5.5% ÷ 12 × 3 ≈ $5,500.
IRD: Rate differential of 1.0% × $400,000 × 2 years remaining ≈ $8,000.
Since the IRD is higher, this lender would charge roughly $8,000 to break the mortgage. Always request an exact payout statement — the formula varies by lender.
Other refinancing costs
Home appraisal: typically $300–$500
Legal fees and disbursements: typically $800–$1,500
Mortgage discharge fee: typically $75–$400
Possible reappraisal or title insurance fees
The 80% loan-to-value limit
Under Canadian federal rules, you can refinance up to a maximum of 80% of your home's appraised value (minus what you still owe). On a $700,000 home, that's a maximum mortgage of $560,000. If you currently owe $450,000, your maximum cash-out is roughly $110,000, before costs. You'll also need to pass the mortgage stress test at the Bank of Canada's qualifying rate or your contract rate plus 2%, whichever is higher — even if you already qualified for your existing mortgage.
When does refinancing make sense?
Rates have dropped enough that savings exceed your penalty and costs
You have high-interest debt to consolidate at a much lower rate
Your home has appreciated significantly since purchase
You need funds for a major renovation or life event
You want to switch from variable to fixed (or vice versa)
Your mortgage is coming up for renewal within 120 days
When refinancing is NOT worth it
Refinancing usually doesn't pay off if your penalty and closing costs outweigh the interest savings, if you're close to renewal anyway, or if you'd be extending your amortization back out to 25–30 years just to lower your payment — which can cost more in total interest over time. If you only need short-term cash flow, a HELOC may be cheaper than a full refinance.
Break-even rule of thumb
Compare your total cost to refinance (penalty + legal + appraisal + discharge) against your monthly savings.
If monthly savings × remaining months on your term > total cost to refinance, it's typically worth it. For example, saving $200/month with $3,000 in total costs means you break even in about 15 months. Try our mortgage refinance calculator to model your own numbers.
Frequently asked questions
Answers to the most common questions Canadians ask before refinancing their mortgage.
What is refinance in mortgage?
A mortgage refinance means replacing your existing mortgage with a new one, usually with a new lender, rate, or loan amount, before your current term ends. Homeowners refinance to get a lower rate, access home equity as cash, or consolidate high-interest debt into one payment. Because it happens mid-term (a "break"), it typically triggers a prepayment penalty from your current lender.
What does it mean to refinance a mortgage?
Refinancing means you pay out your current mortgage in full and sign a new mortgage contract, either with the same lender or a different one. The new mortgage can be for a larger amount (if you're taking out equity), a different rate type, or a different amortization. It requires full re-qualification, including the mortgage stress test, and a new appraisal of your home's value.
How to refinance your mortgage in Canada?
You refinance by getting your home appraised, applying with a broker or lender for a new mortgage of up to 80% of your home's value, and having a lawyer discharge your old mortgage and register the new one. The whole process usually takes two to four weeks from application to funding. Working with a broker lets you compare 65+ lenders at once instead of relying on one bank's offer.
How much does it cost to refinance a mortgage in Canada?
Refinancing typically costs $1,500–$5,000 CAD, covering a home appraisal ($300–$500), legal fees ($800–$1,500), a mortgage discharge fee ($75–$400), and possibly a title search or admin fee. On top of that, breaking your mortgage mid-term usually means paying a prepayment penalty, which can range from a few hundred dollars to tens of thousands depending on your lender and remaining term.
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