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    Mortgage refinancing

    Refinance Your Mortgage in Canada

    Short answer: A mortgage refinance replaces your current mortgage with a new one, usually to access home equity, consolidate debt or change your rate or term. In Canada you can generally borrow up to 80% of your home's value with a regulated lender, you'll need to qualify under the federal stress test, and you may owe a penalty if you break your mortgage before the term ends.[1][2] At 8twelve, we compare options from 65+ lenders so you can see whether refinancing makes sense, at no cost to you, OAC.

    How mortgage refinancing works in Canada

    When you refinance, your lender (or a new one) pays out your existing mortgage and registers a new one against your home. The new loan can be larger than what you owe today, and the difference comes to you as cash or is used to pay off other debts. For a full walkthrough, see our Canadian mortgage refinance guide.

    The 80% loan-to-value limit

    Mortgage default insurance isn't available on refinances, so regulated lenders cap a refinance at 80% of your home's appraised value.[1][2] Your available equity is that 80% figure minus your current mortgage balance and any other secured debt on the property, such as a HELOC. A new appraisal is usually required.

    The mortgage stress test

    Federally regulated lenders must qualify you at the higher of the minimum qualifying rate or your contract rate plus 2%.[3] That means you need to show you could afford your payments if rates were higher. Your income, existing debts and credit history all matter. Some credit unions and private lenders apply different rules, which can open options if a bank says no.

    Prepayment penalties: IRD vs three months' interest

    If you refinance before your term is up, you'll usually pay a prepayment penalty.[4] On a variable-rate mortgage, it's typically three months' interest. On a fixed-rate mortgage, it's typically the greater of three months' interest or the interest rate differential (IRD), which reflects the gap between your rate and the lender's current rate for the time left on your term. Lenders calculate IRD in different ways, so fixed-rate penalties can be substantial.[5] Always get a written penalty quote from your current lender before you decide.

    Reasons Canadians refinance

    Debt consolidation

    A debt consolidation refinance rolls higher-interest balances, like credit cards, lines of credit or car loans, into your mortgage. This can lower your monthly payments and simplify your finances. The trade-off: you're spreading short-term debt over a longer amortization, which can increase the total interest you pay.[6] It works best alongside a plan to avoid building those balances up again. Learn more in our guide to debt consolidation mortgages in Canada.

    Equity takeout

    Homeowners use their equity to fund renovations, help a family member with a down payment, invest or cover a major expense. Because it's secured against your home, it's important to borrow for a clear purpose and with a repayment plan you're comfortable with.

    Changing your rate, term or mortgage type

    Some people refinance to move from variable to fixed (or the reverse), change their amortization, remove a co-borrower after a separation, or switch to a lender with features that fit better. Whether a lower rate actually saves you money depends on your penalty and costs, so we always run the numbers first.

    What does it cost to refinance?

    Beyond any prepayment penalty, typical refinance costs can include:

    • Appraisal fee to confirm your home's current value (some lenders cover this).
    • Legal fees for the lawyer or notary who registers the new mortgage and discharges the old one.
    • Discharge or reassignment fees charged by your current lender.
    • Title insurance, where required.
    • Lender or broker fees on some alternative and private files, which we disclose in writing before you commit.

    Costs vary by lender, province and property, so we give you an itemized estimate up front. See our breakdown of refinance costs in Canada, and if you're considering a private lender, read about private mortgage refinance fees in Ontario.

    How to refinance your mortgage: step by step

    1. Define your goal. Debt consolidation, renovation funds, a rate or term change. Your goal shapes the right product.
    2. Get your penalty quote. Ask your current lender for the exact cost of breaking your mortgage today.
    3. Estimate your equity. Take about 80% of your home's value and subtract what you owe.
    4. Gather documents. Usually ID, income proof (pay stubs, T4s or NOAs), your mortgage statement, property tax bill and statements for any debts being paid off.
    5. Compare lenders. We shop your file across our lending partners and show you the full cost of each option, not just the rate.
    6. Appraisal and approval. The lender orders an appraisal and issues a commitment, OAC.
    7. Sign with your lawyer. Your lawyer pays out the old mortgage and any debts, registers the new one and releases the remaining funds to you.

    When it may be better to wait

    Refinancing isn't always the right move. It may be worth waiting if:

    • Your renewal date is close and waiting would avoid a large penalty.
    • Your penalty and costs outweigh the savings you'd realistically get.
    • Your income recently changed or is hard to document, and a few more months of history would improve your options.
    • You're planning to sell soon.
    • Your credit score is about to improve, for example after paying down a card balance.

    Alternatives like a blend-and-extend, a HELOC or a second mortgage can sometimes achieve the same goal without breaking your mortgage. We'll tell you plainly if waiting is the better call.

    Why use a mortgage broker to refinance?

    Your current bank can only offer its own products. As a licensed brokerage, 8twelve works with 65+ lenders, including banks, credit unions, monoline lenders and alternative and private lenders, so we can compare options side by side for your situation. For most residential refinances, our service is at no cost to you, OAC, because we're paid by the lender. Mortgage brokerages and agents in Ontario are licensed and regulated by FSRA, which sets disclosure duties brokers owe you.[7] You can review our licensing details here.

    Refinancing in your city: see our local guides for refinancing in Calgary and refinancing in Edmonton.

    Refinance FAQ

    How much can I borrow when I refinance in Canada?

    Short answer: Up to 80% of your home's appraised value, minus what you still owe, with a regulated lender. That 80% ceiling applies to refinances under federal rules; some lenders set lower limits, and private lenders follow their own criteria. Final amounts depend on your appraisal, income and credit, OAC.

    Do I have to pass the stress test to refinance?

    Short answer: Yes, with federally regulated lenders. You qualify at the higher of the minimum qualifying rate or your contract rate plus 2%, as set by OSFI. Some provincially regulated lenders and private lenders apply different standards, which a broker can explain for your situation.

    What is the penalty for breaking my mortgage early?

    Short answer: It depends on your mortgage type and lender. Variable-rate mortgages usually carry a penalty of three months' interest. Fixed-rate mortgages usually carry the greater of three months' interest or an interest rate differential (IRD), and lenders calculate IRD differently. Ask your lender for a written penalty quote.

    Can I refinance to consolidate debt?

    Short answer: Yes, if you have enough equity and qualify. Rolling higher-interest balances into your mortgage can lower your monthly payments, but it spreads that debt over a longer period, so you may pay more interest overall. We walk through the total cost with you before you decide.

    How long does a mortgage refinance take?

    Short answer: Often a few weeks, but timing varies. It depends on how quickly documents, the appraisal and the lawyer's work come together. Start well before any deadline you're working toward.

    Can I refinance before my term ends?

    Short answer: Yes, but you'll usually pay a prepayment penalty. Comparing that penalty against your expected savings is the key step. In some cases a blend-and-extend or waiting until renewal works out better.

    Does it cost anything to use 8twelve as my broker?

    Short answer: No, for most residential refinances with our lending partners. We're typically paid by the lender, at no cost to you, OAC. If a file requires a fee, such as some private or alternative lending, we disclose it in writing up front, before you commit.

    Can I refinance with bad credit or self-employed income?

    Short answer: Often, yes. Alternative and private lenders consider files that banks decline, usually at higher rates and fees. We'll show you the costs clearly and help you plan a path back to a prime lender.

    Sources

    1. FCAC, Borrowing against home equity
    2. OSFI, Guideline B-20: Residential Mortgage Underwriting Practices and Procedures
    3. OSFI, Minimum qualifying rate for uninsured mortgages
    4. FCAC, Mortgage fees: Prepayment penalties
    5. FCAC, Breaking your mortgage contract
    6. FCAC, Debt consolidation
    7. FSRA, Mortgage brokering: information for consumers

    OAC (on approved credit). All mortgages are subject to lender approval, property appraisal and qualification criteria; terms and conditions apply. This page is general information, not financial, legal or tax advice. Rates, fees, penalties and lending policies vary by lender and change over time. 8Twelve Mortgage Corp.: see https://8twelve.mortgage/licenses for licence details.

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