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How refinancing your mortgage works


Refinancing your mortgage means renegotiating your agreement so that it’s a better fit for you. You can lower borrowing costs by taking advantage of a lower interest rate, a shorter term, or more prepayment options. You could also alter your mortgage so that you can access your home equity to pay for large expenses or help consolidate your debt.

You can apply to refinance a mortgage at any time, but the ideal time is often when your mortgage is up for renewal. Refinancing before your renewal date could lead to penalty fees. Even so, if the amount you’ll save by changing your mortgage will cover the fees, it can still be a good decision.

Great reasons to refinance


Reduce your mortgage costs

Interest rates go up and down and there’s a wide variety of mortgages to choose from these days. Refinancing lets you explore a new combination of rates and mortgage features that could save you money.

  • Lower your interest rate: A lower interest rate could save you money and help you pay down more of your principal amount each month.
  • Convert a variable to a fixed-rate mortgage: This can protect you from rising interest rates by securing a set rate. Or, if rates are falling and your home is close to being paid for, switching from a fixed to a variable-rate mortgage can save you interest and shrink your monthly payments.
  • Prepay more: Changing to a mortgage with better prepayment privileges means you could pay your home off faster.
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Get the money for a large purchase or consolidate debt

Using the equity in your home can give you access to flexible and affordable credit.

  • You may be able to access up to 80% of your home’s value to borrow additional funds.
  • When faced with a major expense, borrowing against your home’s value usually means you get a lower interest rate than you would pay with other forms of borrowing.
  • Consolidating balances from higher-interest credit cards and other loans can help you save money by lowering your overall interest rate.


This is an example of how you can calculate how much credit you could access, based on your home’s value and your mortgage:

Estimated home value Maximum amount you could borrow – 80% Minus the amount of money owing on the mortgage How much you could borrow
$400,000 $320,000 $150,000 $170,000

How much does it cost to refinance your mortgage?


When you refinance, you essentially create a new mortgage, so there will be some charges for legal, set-up, and appraisal services. How much you pay in fees will depend on the size of your mortgage and when you choose to refinance.

This chart shows what you can typically expect to pay in fees. If the cost of refinancing is less than the amount of money you could save, it may be the right choice for you.

Penalty or fee Refinancing at the end of your current term Refinancing mid-term What to expect (estimates only)
Mortgage registration fee Yes. The amount varies by province. Yes. The amount varies by province. Typically, $70
Legal fees Yes Yes $750 - $1,250
Appraisal fee Yes Yes Up to $315
Mortgage discharge fee

Yes, if you are switching to a new financial institution.

No, if you refinance with your current lender.

Yes, if you are switching to a new financial institution.

No, if you refinance with your current lender.

$200 - $350
Mortgage prepayment penalty

Yes. A typical prepayment fee is the greater of:

  • 3 months’ interest or
  • The Interest Rate Differential (IRD)

The purpose of the IRD is make up for interest that you agreed to pay when you created your mortgage.

No

A Mortgage Specialist can help you estimate the cost of your mortgage prepayment penalty.