When does refinancing a mortgage make financial sense?

Refinancing makes financial sense when the savings from a lower interest rate exceed the cost of breaking your current mortgage (prepayment penalty). As a rule of thumb: if you can lower your rate by 0.5% or more and you have at least 24 months remaining on your term, refinancing is often worth calculating. Other strong reasons to refinance include accessing home equity for renovations or debt consolidation, switching from variable to fixed rate, or removing a co-signer from the mortgage.

How much can I borrow when refinancing my mortgage in Canada?

When refinancing, Canadian lenders will allow you to borrow up to 80% of your home's current appraised value, minus what you still owe on your mortgage. For example: if your home is appraised at $900,000 and you owe $500,000, you could refinance up to $720,000 (80% of $900,000), giving you access to $220,000 in home equity. The funds can be used for any purpose including renovations, investments, or debt consolidation.

What is a mortgage prepayment penalty and how is it calculated?

A prepayment penalty is charged by lenders when you break a mortgage before its term ends. For fixed-rate mortgages, the penalty is the greater of: (1) 3 months' interest, or (2) the Interest Rate Differential (IRD) — which is calculated as the difference between your rate and the current rate for the remaining term, multiplied by your outstanding balance and the months remaining. For variable-rate mortgages, the penalty is typically just 3 months' interest. On a $500,000 fixed mortgage with 3 years remaining, IRD penalties can range from $8,000 to $25,000 depending on the rate differential.

How long does it take to refinance a mortgage in Ontario?

Refinancing in Ontario typically takes 3–6 weeks from application to completion. The process includes: applying with a broker (1–2 days), lender approval and appraisal (5–10 business days), legal work and title search (2–3 weeks), and closing and payout of the existing mortgage. The most common delay is the property appraisal, which some lenders require and can take 7–14 days.

Updated April 2026

When & How to Refinance
Your Mortgage in Ontario

Learn exactly when refinancing makes sense, how to calculate your break-even point, what penalties to expect, and how to access your home equity at the best rate.

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5 Reasons Canadians Refinance Their Mortgage

Lower Your Interest Rate

If mortgage rates have dropped since you signed your mortgage, refinancing can save you thousands per year. On a $600,000 mortgage, a 1% rate reduction saves $6,000 per year — $30,000 over a 5-year term. The key question is whether the savings exceed your prepayment penalty (your 'break-even point').

Access Home Equity

Canadian homeowners can access up to 80% of their home's appraised value through refinancing. If you bought your Oshawa home 5 years ago for $650,000 and it's now worth $900,000, and you owe $480,000, you could access up to $240,000 in equity ($720,000 × 80% − $480,000 owed).

Consolidate High-Interest Debt

Rolling credit card debt (19.99%), personal loans (10–15%), and car loans into your mortgage (5%) dramatically reduces your monthly payments. $60,000 in credit card debt at 19.99% costs approximately $1,000–$2,000/month. Consolidated into a mortgage at 5%, the same balance costs approximately $320/month.

Change Your Mortgage Terms

Switch from variable to fixed rate for payment certainty, reduce your amortization to build equity faster, or extend amortization to reduce monthly payments. Refinancing also allows you to add or remove co-borrowers from the mortgage.

Fund Home Renovations

Accessing home equity for renovations at mortgage rates (4–6%) is far cheaper than a home equity line of credit (prime + 0.5%), personal loan (8–12%), or contractor financing (10–20%). A $100,000 kitchen and basement renovation financed through mortgage equity costs approximately $535/month at 5% over 25 years.

Should You Refinance? Common Scenarios

Rate is 1% lower than current

Save $5,000/year on a $500K mortgage

Strong candidate for refinancing

Rate is 0.5% lower than current

Save $2,500/year on a $500K mortgage

Calculate break-even vs. penalty

Need $100K for home renovation

Access equity at 5% vs. 20%+ on a LOC

Strong case if you have the equity

$50K in credit card debt at 19.99%

Reduce payments from $1,500+/mo to ~$270/mo

Excellent financial decision

6 months left on term

Minimal penalty — easy break-even

Better to wait for renewal

The Break-Even Formula

Break-Even = Prepayment Penalty ÷ Monthly Savings

Example: $12,000 penalty ÷ $500/month savings = 24 months to break even. If you plan to stay in the home for more than 24 months, refinancing is worth it. Our team calculates this for you free of charge.

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We'll calculate your break-even point, find your best rate from 50+ lenders, and tell you honestly if refinancing makes sense for your situation.

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When & How to RefinanceYour Mortgage in Ontario