Mortgage Refinancing
When refinancing your mortgage makes financial sense — and when it doesn't.
What refinancing actually changes
Refinancing means breaking your existing mortgage before its term ends and replacing it with a new one. The new mortgage can have a different balance (often higher, to access equity), a different lender, a different rate, and a different amortization. It's a powerful tool — but breaking a fixed-rate mortgage typically triggers a penalty.
The three reasons to refinance
Refinances generally make sense for one of three reasons: (1) accessing equity to consolidate high-interest debt or fund a renovation or investment, (2) extending amortization to reduce monthly payments and improve cash flow, or (3) capturing a meaningful rate drop. Outside those scenarios, the break penalty usually outweighs the savings.
How break penalties work in Ontario
For fixed-rate mortgages, the penalty is the greater of three months' interest or the Interest Rate Differential (IRD). For variable-rate mortgages, it's typically just three months' interest. IRD calculations vary dramatically between lenders — the Big Five use posted-rate IRD which can be punishing, while mono-lines often use a more favourable contract-rate calculation.
How much can I refinance?
Refinances are capped at 80% of your home's appraised value in Canada. That ceiling combined with current value sets your maximum new mortgage. If you owe $400,000 on a $750,000 home, the math is: $750K × 0.80 = $600K maximum, less your existing $400K = up to $200K of accessible equity (before penalty and legal costs).
Refinance vs HELOC vs second mortgage
If you only need access to a portion of your equity and your existing first mortgage has an attractive rate, a HELOC or second mortgage often beats a full refinance. Jay Klair runs the side-by-side math on every file to identify which structure delivers the lowest total cost.
Have questions about your situation?
Every mortgage file has its own story. A 15-minute call with Jay is enough to know your real options.