What does it mean to refinance a mortgage in Canada?

Refinancing means breaking your existing mortgage and replacing it with a new one — typically with different terms, a different rate, or a different balance. You might refinance to access home equity (cash-out refinancing), lower your interest rate, consolidate debt, or change your amortization. Unlike renewal, refinancing usually happens mid-term and involves penalties and fees.

How much does it cost to refinance a mortgage in Canada?

The main costs are the prepayment penalty (3 months interest for variable, or the higher of 3 months interest or IRD for fixed — potentially $5,000–$20,000+), legal fees ($500–$1,500), appraisal fee ($300–$500), and discharge fee ($200–$400). Total refinancing costs range from $2,000 to $25,000+ depending on your penalty.

When does refinancing make financial sense?

Refinancing makes sense when the savings from a lower rate or the benefit of accessing equity exceeds the total cost of refinancing. A common rule of thumb: if you can reduce your rate by at least 1% and have 2+ years left in your term, refinancing often saves money. Use a break-even calculator to compare the penalty versus the savings.

Can I refinance to access my home equity?

Yes. Cash-out refinancing lets you borrow up to 80% of your home current appraised value. If your home is worth $700,000 and you owe $350,000, you could refinance up to $560,000 (80% of $700K) and receive $210,000 in cash. This cash can be used for renovations, investing, debt consolidation, or any purpose. The interest rate is typically lower than a HELOC or personal loan.

What is the difference between refinancing and getting a HELOC?

Refinancing replaces your entire mortgage with a new one — the full amount is at one rate, with one fixed payment schedule. A HELOC is a revolving line of credit secured against your home equity that you draw from as needed. Refinancing gives you a lump sum at a lower rate; a HELOC gives you flexible ongoing access but at a higher (variable) rate.

How much equity do I need to refinance?

You need at least 20% equity in your home to refinance. Lenders will not refinance beyond 80% loan-to-value (LTV). If your home is worth $600,000, the maximum refinanced mortgage is $480,000. If you currently owe $470,000, refinancing is not an option until your equity grows.

Mortgage Refinancing in Canada: Complete Guide to Refinancing Your Home

Refinancing your mortgage means replacing your existing mortgage with a new one — often to access home equity, lower your rate, consolidate debt, or restructure your payments. It is a powerful financial tool, but it comes with costs that need to be carefully weighed against the benefits.

This hub covers everything you need to know about mortgage refinancing in Canada.

Refinancing guides and tools

📋 Refinancing Guide

When Should I Refinance? — Complete guide to deciding whether refinancing makes financial sense for your situation.

💰 Cash-Out Refinancing

Cash-Out Refinance Guide — How to access your home equity through refinancing, with examples and tax implications.

🖥️ Digital Refinancing

Digital Mortgage Refinance Guide — How online lenders are streamlining the refinance process and reducing costs.

📊 Refinance Calculator

Refinance Calculator — Estimate your new payment and compare the cost of refinancing vs staying in your current mortgage.

✅ Refinance Checklist

Refinance Checklist — Step-by-step process including break-even analysis and document preparation.

⚖️ Break-Even Calculator

Break-Even Calculator — How long until the savings from refinancing offset the penalty and fees.

How refinancing works

The refinancing process

Determine your goal — Why are you refinancing? Lower rate, access equity, consolidate debt, or extend amortization?
Calculate your penalty — Use the mortgage penalty calculator to find the exact cost of breaking your current mortgage
Get an appraisal — The lender needs your home’s current market value to determine how much you can borrow
Shop for rates — Compare refinance rates from multiple lenders. Refinance rates may differ from purchase rates
Run the break-even analysis — Will the savings exceed the costs? How many months until you break even?
Close the new mortgage — Sign new documents, pay the penalty and fees, and your new mortgage begins

Costs of refinancing

Cost	Typical Amount	Notes
Prepayment penalty	$2,000–$20,000+	Biggest cost; depends on rate type and remaining term
Legal fees	$500–$1,500	For mortgage discharge and registration
Appraisal fee	$300–$500	Lender may waive this
Discharge fee	$200–$400	Charged by your current lender
Title insurance	$200–$400	May be required by new lender
Total	$3,200–$22,800+

→ How Mortgage Penalties Are Calculated — Understanding IRD vs 3 months’ interest

Common reasons to refinance

Lower your interest rate

If rates have dropped significantly since you took your mortgage, refinancing can save thousands — but only if the savings exceed the penalty. The general rule: refinancing for a rate drop of 1%+ with 2+ years remaining usually pays off.

→ Should I Break My Mortgage for a Lower Rate?

Access home equity

Cash-out refinancing lets you tap into your equity for:

Home renovations — Increase your property value
Investing — The Smith Manoeuvre makes the interest tax-deductible
Debt consolidation — Replace high-interest debt with low mortgage rates
Education, business, or other goals

You can borrow up to 80% of your appraised home value minus your current mortgage balance.

→ Cash-Out Refinance Canada → Debt Consolidation Using Home Equity

Consolidate debt

Refinancing to consolidate credit card debt, car loans, and other high-interest debt into your mortgage can dramatically reduce your monthly payments and interest costs. However, this effectively turns unsecured debt into secured debt backed by your home — which increases the risk.

Extend your amortization

If you are struggling with payments, refinancing with a longer amortization (up to 30 years if you have 20%+ equity) can lower your monthly payment significantly. The trade-off is paying more total interest over the life of the mortgage.

Refinancing vs alternatives

Option	Best For	Rate	Access Type
Refinance	Large lump sum, lower rate	Lowest (mortgage rate)	One-time lump sum
HELOC	Ongoing flexible access	Higher (prime + 0.5–1%)	Revolving credit
Home equity loan	Fixed lump sum, predictable payments	Mid-range	One-time lump sum
Second mortgage	Cannot break first mortgage	Highest	One-time lump sum

→ HELOC vs Refinance — Detailed comparison → HELOC vs Home Equity Loan — Which is right for you → Mortgage vs Home Equity Loan vs HELOC — Three-way comparison → Home Equity Hub — All home equity options explained

Refinancing and taxes

In most cases, mortgage interest on your principal residence is not tax-deductible in Canada. However, if you refinance and use the funds for investment purposes (buying rental property, investing in stocks/funds), the interest on the borrowed portion may be tax-deductible.

→ Smith Manoeuvre Guide — Convert your non-deductible mortgage interest into tax-deductible investment interest → Mortgage Interest Tax Deductible for Rental — When rental property mortgage interest is deductible

Mortgage Renewal Guide — Different from refinancing — renewal happens at term end
Renewal vs Refinance — Side-by-side comparison
Mortgage Penalty Calculator — Calculate the cost of breaking your mortgage
Mortgage Rates — Current refinance rates
Mortgage Comparison Worksheet — Compare refinancing offers