Mortgage Refinancing Ontario: A Complete Guide for Homeowners (2025)
Considering mortgage refinancing in Ontario? Whether you want to lower your rate, access your home equity, or consolidate debt, refinancing can be a powerful financial tool—if done right. This comprehensive guide covers everything Ontario homeowners need to know about mortgage refinancing in 2025.
What is Mortgage Refinancing?
Refinancing means replacing your current mortgage with a new one—typically with different terms, a different rate, or a different loan amount. You’re essentially paying off your existing mortgage and starting fresh with a new lender or new terms.
Unlike renewing your mortgage (where you simply extend with your current lender), refinancing lets you renegotiate everything: your rate, your amortization period, and how much you’re borrowing.
Top Reasons Ontario Homeowners Refinance Their Mortgages
1. Get a Lower Interest Rate
If rates have dropped since you got your mortgage, or if your credit score has improved significantly, you might qualify for a better rate. Even a 0.5% reduction can save you thousands over your mortgage term. Many homeowners pursue mortgage refinancing in Ontario specifically to take advantage of rate drops.
2. Access Your Home Equity
Your home equity is the difference between your home’s value and what you owe. Refinancing lets you borrow against this equity for:
- Home renovations or repairs
- Investing in another property
- Starting a business
- Education expenses
- Emergency funds
You can typically borrow up to 80% of your home’s appraised value, minus what you still owe. Learn more about CMHC mortgage guidelines.
3. Consolidate High-Interest Debt
Credit cards charging 19-25% interest? Personal loans at 10-15%? Consolidating these into your mortgage (at 4-6%) can dramatically reduce your monthly payments and total interest paid.
I’ve helped clients save $800+ per month by consolidating credit card debt into their mortgage through mortgage refinancing in Ontario. It’s one of the most impactful financial moves you can make.
4. Change Your Mortgage Terms
Refinancing lets you adjust your mortgage to match your current situation:
- Extend your amortization to lower monthly payments
- Shorten your amortization to pay off faster and save interest
- Switch from variable to fixed (or vice versa)
- Add or remove a co-borrower (common after divorce)
The Costs of Mortgage Refinancing in Ontario
Refinancing isn’t free. Before you proceed, understand these potential costs:
Prepayment Penalty
If you break your mortgage before the term ends, you’ll pay a penalty. For variable-rate mortgages, this is typically 3 months’ interest. For fixed-rate mortgages, it’s the greater of 3 months’ interest OR the Interest Rate Differential (IRD)—which can be substantial.
Example: On a $400,000 fixed mortgage with 3 years remaining, the penalty could range from $4,000 to $15,000+ depending on how rates have changed.
Other Costs to Consider
| Cost | Typical Amount |
|---|---|
| Appraisal fee | $300-500 (sometimes waived) |
| Legal fees | $800-1,500 |
| Discharge fee | $200-400 |
| Title insurance | $200-400 |
The key question: Will your savings outweigh these costs? That’s exactly what I calculate for every client before recommending mortgage refinancing in Ontario.
When Does Mortgage Refinancing in Ontario Make Sense?
Refinancing typically makes financial sense when:
- You can get a rate at least 0.5-1% lower than your current rate
- You have high-interest debt to consolidate
- You need to access equity for a major expense
- Your home has appreciated significantly
- You’re approaching renewal anyway (penalty-free window)
- Your financial situation has changed and you need different terms
The Break-Even Calculation
Here’s a simplified example:
| Factor | Amount |
|---|---|
| Refinancing costs (including penalty) | $8,000 |
| Monthly savings with new rate | $300 |
| Break-even point | 27 months |
If you plan to stay in your home longer than 27 months, refinancing makes sense. If you’re moving soon, it probably doesn’t.
How Much Can You Borrow When Refinancing in Ontario?
In Canada, you can refinance up to 80% of your home’s current appraised value. Here’s how to calculate your potential borrowing power:
| Factor | Amount |
|---|---|
| Home value | $800,000 |
| Maximum refinance (80%) | $640,000 |
| Current mortgage balance | $450,000 |
| Available equity | $190,000 |
In this scenario, you could potentially access up to $190,000 through refinancing (minus costs).
The Mortgage Refinancing Ontario Process: Step by Step
Here’s what to expect when refinancing your mortgage:
- Initial consultation – We review your goals, current mortgage, and financial situation
- Penalty calculation – I’ll get the exact prepayment penalty from your current lender
- Cost-benefit analysis – We crunch the numbers to ensure refinancing makes sense
- Application – Submit your application with income and property documentation
- Appraisal – The new lender orders an appraisal of your home
- Approval – Once approved, you’ll receive your commitment letter
- Legal closing – Sign documents with a lawyer, old mortgage is discharged, new one begins
The entire process typically takes 2-4 weeks from application to closing.
Refinancing vs. HELOC: Which is Better?
If you just need access to equity, a Home Equity Line of Credit (HELOC) might be an alternative. Learn more about HELOCs from the Government of Canada.
Choose Refinancing if:
- You want a lower rate on your entire mortgage
- You prefer fixed, predictable payments
- You’re consolidating debt and want it rolled into one payment
- You need a large lump sum
Choose a HELOC if:
- You only need occasional access to funds
- You want flexibility to borrow and repay
- You don’t want to break your current mortgage
- You’re comfortable with variable rates
Frequently Asked Questions About Mortgage Refinancing in Ontario
Can I refinance with bad credit?
Yes, though your options may be limited. If your credit has dropped, alternative lenders may still approve you—often at higher rates. If your credit has improved since your original mortgage, refinancing could actually get you a better rate. Contact me to discuss your options.
How often can I refinance?
Technically, there’s no limit. However, each refinance has costs, so it only makes sense when the financial benefit outweighs those costs. Most people refinance once every few years at most.
Will refinancing affect my credit score?
There will be a small, temporary dip from the credit inquiry and new account. However, if you’re consolidating debt, your credit utilization will improve—which typically helps your score in the long run.
Can I refinance if I’m self-employed?
Absolutely. Self-employed borrowers can refinance, though documentation requirements may differ. As a mortgage broker serving Milton and the GTA, I work with lenders who understand self-employment income and can often find better solutions than big banks.
Is Mortgage Refinancing in Ontario Right for You?
Every situation is different. What makes sense for your neighbour might not make sense for you. That’s why I always start with a free, no-obligation analysis of your specific situation.
I’ll calculate your exact penalty, compare your options, and give you honest advice—even if that advice is “don’t refinance right now.”
Serving homeowners in Milton, Oakville, Burlington, Mississauga, Brampton, and throughout the GTA.
Carl Zuzart is a licensed mortgage broker (License #M25001564) with Pineapple Mortgages, serving the Greater Toronto Area. Have questions? Call 289-298-2989 or email mortgages@zuzart.ca.
