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Refinance

Learn how refinancing works in Canadian real estate, when it makes sense, and how it can help homeowners save money or access equity.

Refinance

May 22, 2025


What is Refinancing?

Refinancing involves replacing an existing mortgage with a new one, often to access home equity, secure a lower interest rate, or consolidate debt.

Why Refinancing Matters in Real Estate

In Canadian real estate, refinancing is a common strategy for homeowners to adjust their mortgage terms or access cash. Reasons to refinance include:

  • Securing a lower interest rate
  • Switching from a variable to a fixed rate (or vice versa)
  • Accessing equity for renovations, education, or investment
  • Consolidating high-interest debt into a single loan

Considerations when refinancing include:

  • Prepayment penalties (IRD or 3-month interest)
  • Legal and appraisal fees
  • Updated credit check and qualification review

Homeowners may refinance with their existing lender or switch to a new lender through a mortgage transfer. Timing and rate trends affect whether refinancing is beneficial.

Understanding refinancing helps homeowners improve financial flexibility and long-term affordability, but requires careful cost-benefit analysis.

Example of Refinancing

A homeowner with a 5.1% mortgage refinances at 4.4%, paying a $2,000 penalty but saving thousands over the remaining term.

Key Takeaways

  • Replaces an old mortgage with a new one.
  • Can reduce rates or access equity.
  • May involve penalties or fees.
  • Requires new qualification review.
  • Useful for long-term savings or consolidation.

Related Terms

  • Mortgage Term
  • Interest Rate Differential
  • HELOC
  • Equity
  • Prepayment Penalty

Additional Terms

Recourse Loan

A recourse loan is a type of loan where the lender can pursue the borrower’s personal assets, beyond the collateral, in the event of default.. more

Pari Passu

A pari passu clause is a contractual provision ensuring that multiple creditors share equally in repayment priority from the borrower’s assets.. more

Non-Recourse Loan

A non-recourse loan is a type of loan where the lender’s only remedy in case of default is to seize the collateral property; the borrower is not. more

Net Operating Income

Net operating income (NOI) is the total income generated by a property after operating expenses are deducted but before taxes and financing costs.. more

Mechanic's Lien

A mechanic’s lien is a legal claim by a contractor, subcontractor, or supplier for unpaid work or materials provided for a property.. more

Lis Pendens

Lis pendens is a legal notice filed in the land registry indicating that a property is subject to ongoing litigation that may affect its title.. more

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