How much equity do I need to refinance?

You must keep at least 20% equity, since refinancing in Canada is capped at 80% of your home's appraised value. The amount above your current balance, up to that limit, is what you can access.

Does refinancing cost money?

Usually. If you break your term early you will likely pay a prepayment penalty, plus costs such as appraisal, legal, and possibly discharge fees. The benefit must outweigh these costs to be worthwhile.

What is the difference between refinancing and renewal?

Renewal happens at the end of your term and continues roughly the same loan. Refinancing can occur any time, usually changes the loan amount or terms significantly, and requires re-qualifying.

Mortgage Glossary

What is Refinancing?

Refinancing is the process of replacing your current mortgage with a new one, usually to get a lower rate, access home equity, change your term, or consolidate debt. The new mortgage pays off the old one, often before its term ends. In Canada, refinancing lets you borrow up to 80% of your home's value.

Find my best mortgage Back to glossary

Quick answer

Also known as: mortgage refinance

Key points

Replaces your existing mortgage with a new one, often with new terms.
Common goals: lower rate, access equity, consolidate debt, or change amortization.
In Canada you can refinance up to 80% of your home's appraised value.
Breaking your term early usually triggers a prepayment penalty.
Requires re-qualifying, including passing the mortgage stress test.

Refinancing explained

Refinancing means breaking or renegotiating your existing mortgage and arranging a new one in its place, potentially with a different lender, rate, amount, or amortization. Borrowers refinance to lower their interest rate, pull out equity for renovations or other needs, consolidate higher-interest debt into the mortgage, or restructure their payments. Unlike a simple renewal, refinancing usually changes the loan amount or terms substantially.

In Canada you can refinance up to 80% of your home's appraised value, meaning you must retain at least 20% equity. Refinancing before your term ends typically triggers a prepayment penalty, and it requires re-qualifying, including passing the mortgage stress test. The savings or benefit must outweigh the penalty and closing costs for refinancing to make sense.

What a Refinancing is for

Refinancing exists to let homeowners restructure their mortgage when their needs or the rate environment change. It is used to capture lower rates, tap accumulated equity, fold expensive debts like credit cards into a lower-rate mortgage, or extend the amortization to ease cash flow. It turns home equity into accessible funds without selling the property.

How it can help you

Refinancing can cut your interest costs, free up cash, or simplify several debts into one lower payment, but only if the gains beat the penalty and fees. Running the numbers, including any prepayment penalty, the new rate, and closing costs, is essential. Because the best refinance rate may come from a different lender than your current one, Lenderoo lets you compare refinancing offers across 40+ lenders for free so you can see whether switching is worth it.

When it comes up

A homeowner with $40,000 of credit-card and car debt at high interest refinances their mortgage to roll those balances into the loan at a far lower rate. Their total monthly payments drop sharply. They check that the interest saved over time outweighs the prepayment penalty for breaking their existing mortgage before deciding to proceed.

Example: refinancing to consolidate debt

Your home is worth $500,000 and you owe $300,000, so you have $200,000 in equity. You can refinance up to 80% of value, which is $400,000, freeing up to $100,000.

You pull out $40,000 to clear high-interest debt that was costing roughly 19%, moving it into your mortgage at around 5%. The interest saving is large, but you must also pay a prepayment penalty to break the old mortgage plus closing costs. If those costs total $5,000 and you save far more in interest, refinancing pays off.

Have a question about refinancing?

Lenderoo shops 40+ lenders for free and matches you with a mortgage professional who explains every term — and finds your best rate.

Get pre-approved free Talk to an expert

Questions & answers

Refinancing: frequently asked questions

Common questions Canadians ask about refinancing.

Keep learning

Related mortgage terms

Renewal

Renegotiating your mortgage terms at the end of a term.

Read definition

Prepayment Penalty

Fee charged for paying off a mortgage early.

Read definition

Equity

The difference between a home's market value and outstanding mortgage balance

Read definition

Stress Test

A federal qualifying rule that requires borrowers to prove they could afford payments at a higher rate than their actual contract rate.

Read definition

Loan-to-Value Ratio (LTV)

The ratio of the mortgage amount to the property's value, shown as a percentage.

Read definition

Back to full glossary

Understand your mortgage with confidence

Lenderoo shops 40+ lenders for free and pairs you with a mortgage professional who keeps the jargon simple — and gets you a great rate.

Find my best mortgage Explore the glossary

Mortgage Glossary

What is Refinancing?

Find my best mortgage Back to glossary

Quick answer

Also known as: mortgage refinance

Key points

Replaces your existing mortgage with a new one, often with new terms.
Common goals: lower rate, access equity, consolidate debt, or change amortization.
In Canada you can refinance up to 80% of your home's appraised value.
Breaking your term early usually triggers a prepayment penalty.
Requires re-qualifying, including passing the mortgage stress test.

Refinancing explained

What a Refinancing is for

How it can help you

When it comes up

Example: refinancing to consolidate debt

Your home is worth $500,000 and you owe $300,000, so you have $200,000 in equity. You can refinance up to 80% of value, which is $400,000, freeing up to $100,000.

Have a question about refinancing?

Lenderoo shops 40+ lenders for free and matches you with a mortgage professional who explains every term — and finds your best rate.

Get pre-approved free Talk to an expert

Questions & answers

Refinancing: frequently asked questions

Common questions Canadians ask about refinancing.

Keep learning

Back to full glossary

Understand your mortgage with confidence

Lenderoo shops 40+ lenders for free and pairs you with a mortgage professional who keeps the jargon simple — and gets you a great rate.

Find my best mortgage Explore the glossary