Mortgage Refinancing in Ontario

What Is Mortgage Refinancing?

Refinancing replaces your existing mortgage with a new one — typically with different terms, a different rate, or a higher principal amount. It allows you to access the equity you have built in your home while potentially securing a better interest rate or more favourable terms.

In Ontario, refinancing is a common financial strategy used by homeowners in Hamilton, Burlington, Brantford, St. Catharines, and throughout Southern Ontario to improve their overall financial position.

Common Reasons to Refinance

• Debt consolidation: Roll high-interest credit card debt, car loans, and lines of credit into your mortgage at a much lower rate. A $40,000 balance at 19.99% on credit cards costs $8,000 per year in interest alone — consolidating it into a 4.5% mortgage reduces that to $1,800.
• Home renovations: Access your equity to fund kitchen remodels, additions, basement finishes, or energy-efficient upgrades that increase your property value.
• Securing a better rate: If rates have dropped significantly since you locked in, refinancing can save you thousands over the remaining life of your mortgage.
• Changing your mortgage term: Switch from variable to fixed (or vice versa) to better match your risk tolerance and financial plans.
• Accessing equity for investment: Use home equity to invest in rental properties, education, or business opportunities.
• Removing a co-borrower: After a separation or divorce, refinancing allows one party to take over the mortgage independently.

How Much Can You Borrow?

In Canada, the maximum loan-to-value (LTV) for a refinance is 80%. This means you can borrow up to 80% of your home’s current appraised value, minus your existing mortgage balance.

For example, if your home in Hamilton is appraised at $700,000 and you owe $350,000, you could access up to $210,000 in equity ($700,000 x 80% = $560,000, minus $350,000 = $210,000). Your equity is calculated based on a professional appraisal, which considers recent comparable sales, property condition, and local market trends.

Refinancing Costs

Before refinancing, it is important to understand the costs involved and ensure the financial benefit outweighs them:

• Prepayment penalty: If you are breaking your mortgage mid-term, the penalty depends on your mortgage type. Variable-rate mortgages typically cost three months’ interest. Fixed-rate mortgages cost the greater of three months’ interest or the Interest Rate Differential (IRD) — which can be substantial, sometimes $10,000 to $25,000 or more on bank mortgages.
• Appraisal fee: $300-$500 for a professional property valuation
• Legal fees: $500-$1,500 for a real estate lawyer to register the new mortgage
• Discharge fee: $200-$400 charged by your current lender to remove the existing mortgage
• Title insurance: $200-$400

Important for Ontario homeowners: Refinancing does not trigger Ontario Land Transfer Tax because there is no property transfer — you are simply restructuring the mortgage on your existing home. This is a significant advantage compared to selling and repurchasing.

The Stress Test and Refinancing

All refinances in Canada must pass the mortgage stress test. You will need to qualify at the higher of your contract rate plus 2% or the Bank of Canada benchmark rate of 5.25%. Because refinances are always conventional (uninsured), lenders may also apply stricter qualification criteria than for insured purchase mortgages.

If qualifying is a challenge, I work with multiple lender tiers — A-lenders, credit unions, and B-lenders — to find the best fit for your income and credit profile.

Refinance vs. HELOC

Homeowners often wonder whether a refinance or a Home Equity Line of Credit (HELOC) is the better choice. The right answer depends on how you plan to use the funds:

• Refinance is ideal for a one-time lump-sum need — debt consolidation, a major renovation, or a large equity withdrawal. You get a fixed amortization schedule with predictable payments, and you can borrow up to 80% LTV.
• HELOC is better for ongoing or flexible access to funds. It provides a revolving credit line at a variable rate with interest-only payment options, but is capped at 65% LTV. A HELOC can also be combined with a mortgage in a readvanceable product.

In many cases, I recommend a combination — a lower mortgage balance with a HELOC attached for flexibility. I will help you determine the right structure based on your goals.

When Refinancing Makes Sense

Refinancing is a smart financial move when the savings or benefits clearly outweigh the costs. As a general rule, the savings from refinancing should recoup all costs within two to three years. Situations where refinancing typically makes sense:

• You are carrying $20,000 or more in high-interest debt and the interest savings exceed the penalty and fees
• You need significant funds for renovations that will increase your property value
• Rates have dropped substantially since you locked in and you have several years remaining on your term
• You need to remove a co-borrower after a separation

Refinancing may not be worthwhile if you are close to your renewal date (where switching is free), the rate difference is small, or your property value has declined below the 80% LTV threshold.

Refinancing in Southern Ontario

Property values across Hamilton, Burlington, Brantford, St. Catharines, Caledonia, and the Kawarthas have seen significant appreciation over the past several years. Even after the 2022-2023 market correction, many homeowners have substantial equity available to access through refinancing.

Local appraisal values, neighbourhood trends, and comparable sales all factor into how much equity you can access. I work with trusted local appraisers and understand the nuances of each Southern Ontario market.

Why Work With Dustin?

Refinancing involves more moving parts than a purchase or renewal. Penalties need to be calculated, equity positions verified, and the overall cost-benefit analyzed. I do all of this for you at no cost — lenders pay my fee. I compare options from over 100+ lenders to find the refinance solution that saves you the most money.