Mortgage Refinancing in Canada

How refinancing works, how much equity may be available, and what to check before changing your mortgage

On this page

1. What Mortgage Refinancing Means

Refinancing changes an existing mortgage rather than simply renewing the remaining balance for a new term. A refinance may involve a new lender, a new interest rate, additional borrowing, a change to amortization, or a combination of these. Because the mortgage is being materially changed, the lender normally reassesses the application.

TransactionTypical purposeQualification
RenewalContinue the remaining balance for a new term.Depends on lender and transaction; eligible straight switches can have stress-test exemptions.
RefinanceIncrease borrowing, take equity out, change amortization or restructure the loan.New qualification is normally required.
HELOC / home equity loanBorrow against available home equity without necessarily replacing the first mortgage.Separate credit approval and home-equity limits apply.

2. How Much Equity Can You Access?

FCAC explains that financial institutions may usually allow borrowing secured against the home up to 80% of the home's appraised value. Existing mortgages, HELOCs and other loans secured by the property reduce the amount still available.

Simple planning example

If a home is appraised at $700,000, 80% is $560,000. If the existing mortgage balance is $400,000 and there are no other secured debts, the theoretical room before lender-specific limits would be about $160,000. This is only a planning illustration; approval, appraisal and product rules still apply.

A stand-alone HELOC is generally limited to 65% of the home's appraised value, although combined mortgage/HELOC structures have additional rules. Your lender determines the actual amount available.

3. Qualification and the Mortgage Stress Test

A refinance at a federally regulated lender generally requires you to qualify under the applicable underwriting rules. Where the federal minimum qualifying rate applies, lenders use the greater of the contract rate plus 2 percentage points or 5.25% for qualification. Income, debts, credit history, property value and lender policy also affect approval.

The straight-switch renewal exemptions are designed for transfers that do not materially increase the mortgage amount or remaining amortization. Taking equity out is a refinance, not a straight switch.

Check Your Qualification Range

Use our affordability and stress-test tools for planning estimates before speaking with a lender.

Affordability Calculator Stress Test Calculator

4. Refinance Costs and Break-Even

If you refinance before the end of a closed mortgage term, a prepayment penalty may apply. FCAC notes that penalties can cost thousands of dollars and depend on the mortgage contract and lender formula. Other possible costs include appraisal, legal/notary, discharge, registration, title-search, title-insurance and administration fees.

Before refinancing, get these numbers in writing

✓
Current payout amount

The balance required to discharge the existing mortgage on the planned date.

✓
Prepayment penalty

Ask the current lender for an actual quote and its expiry date.

✓
New mortgage costs

Appraisal, legal/notary, registration, title insurance and lender/broker fees if applicable.

✓
Total interest over the new plan

A lower payment can still cost more if the amortization is extended substantially.

A useful break-even comparison is: total upfront refinance costs ÷ expected monthly savings. That gives a rough number of months needed to recover the upfront costs, but it does not capture every difference in principal repayment or future rates.

5. Common Uses and Trade-Offs

Debt consolidation

Moving high-interest unsecured debt into a mortgage can reduce the interest rate and monthly payment, but the debt may then be repaid over many more years and becomes secured by your home. Compare the total repayment cost, not just the monthly payment.

Renovations or major expenses

Home equity can fund renovations or other large costs, but added borrowing increases the mortgage balance and interest paid. Consider whether the project is necessary, how long you expect to remain in the home and whether a smaller HELOC or loan would be more flexible.

Changing rate or mortgage features

A refinance can be used to change products or lenders before maturity, but the expected benefit should be compared with any break penalty and closing costs.

6. Alternatives to a Full Refinance

  • Wait until renewal: if the change is not urgent, waiting until maturity may avoid a prepayment penalty.
  • HELOC: revolving access to equity, generally with a variable interest rate and a stand-alone limit up to 65% of appraised value.
  • Home equity loan / second mortgage: a lump-sum secured loan; rates and fees can differ from a first mortgage.
  • Use existing prepayment privileges: if the goal is to reduce interest rather than borrow more, extra principal payments may be simpler. See our prepayment calculator.
  • Blend-and-extend or other lender options: some lenders offer alternatives to fully breaking the existing mortgage; terms vary by contract.

7. CMHC Refinance for Secondary Suites

There is a specialized insured-refinance program for eligible homeowners adding self-contained secondary suites. CMHC's current program permits up to 90% loan-to-value based on the applicable lending value, a maximum as-improved/lending value below $2 million and a maximum 30-year amortization, subject to detailed eligibility and construction requirements. The additional financing must be used for the secondary-suite project; general equity take-out is not permitted under that program.

Important: This specialized CMHC program is different from ordinary cash-out refinancing. Confirm current eligibility with an approved lender and CMHC before relying on it.

8. Official Sources

Last reviewed: September 30, 2026.

Disclaimer: This guide is general educational information. Refinancing can increase borrowing and place your home at risk if payments cannot be made. Verify current lender, legal, tax and mortgage-insurance requirements before proceeding.

Mortgage Refinancing FAQs

What does refinancing a mortgage mean in Canada?+
Refinancing replaces or changes an existing mortgage in a material way, often to change the rate or term, increase the mortgage amount, access home equity, consolidate debt or change the amortization. It is different from a simple renewal or straight lender switch.
How much home equity can I usually borrow against?+
FCAC states that financial institutions may usually allow total borrowing secured by the home up to 80% of the home value. The exact limit depends on the product, lender and borrower; a stand-alone HELOC is generally limited to 65% of the home value.
Do I have to pass the mortgage stress test when refinancing?+
A refinance at a federally regulated lender generally requires qualification under the applicable mortgage rules, including the minimum qualifying rate where it applies. The common straight-switch renewal exemption is not intended for equity take-out or an increase in the remaining amortization.
Can refinancing reduce my monthly payment?+
It can, for example if the new rate is lower or the amortization is extended, but a lower payment does not necessarily mean a lower total cost. Extending amortization can increase total interest paid, and refinancing can involve penalties, legal fees, appraisal costs and other charges.
Is refinancing to consolidate debt always a good idea?+
No. A mortgage rate may be lower than unsecured debt rates, but moving short-term debt into a long amortization can increase total interest and puts the home up as security. Compare the full cost, repayment period and risk before proceeding.