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When does refinancing make sense?

The good reasons to refinance a mortgage in Canada, the costs to weigh, and how the 80% rule limits what you can borrow.

3 min read

Illustration: a house filled with what you owe at the bottom and accessible equity above it, up to a dashed line at 80% of the home's value.

Key takeaways

  • Refinancing changes your mortgage, often before your term ends.
  • You can generally borrow up to 80% of your home's value.
  • Add up the costs, especially any penalty, before you commit.

What refinancing means

Refinancing replaces your current mortgage with a new one, usually to change the amount you owe, your rate or your terms. Unlike a renewal, it can happen before your term ends.

Good reasons to refinance

  • Lower your payment. A lower rate or a longer amortization can reduce what you pay each month.
  • Take cash out. Use your home's equity for renovations, investments or a big expense.
  • Consolidate debt. Roll higher-interest debts, like credit cards, into your mortgage at a lower rate.
  • Change your terms. Switch between fixed and variable, or change your amortization.

The 80% rule

In Canada, you can generally refinance up to 80% of your home's value. For example, on a home worth $600,000, you could borrow up to $480,000 in total. If you owe $350,000, that leaves up to about $130,000 you could access, before costs.

The costs to weigh

  • Prepayment penalty if you break your mortgage before the term ends. Often the biggest cost.
  • Legal fees to register the new mortgage.
  • Appraisal fee to confirm your home's value.
  • Discharge fee from your current lender, if you switch.

Rolling debt into your mortgage lowers the rate, but spreads it over many years. Make sure the total interest you'll pay still works in your favour.

Is now the right time?

Refinancing makes sense when the savings or the cash you need outweigh the costs. If your renewal is only a few months away, waiting may avoid the penalty entirely.

A broker can add up the numbers for you and tell you honestly if it's worth it. See your refinancing options.

This guide is general information, not financial advice. Rules and products change, and every situation is different. A licensed mortgage broker can tell you what applies to you.