Mortgage Refinancing

How to Get a Mortgage Refinance in Canada

In Canada, if you’ve taken on a mortgage that’s amortized over a long period of time, fortunately for you the re-financing options are very plausible. Since there are so many different mortgage companies, there are various options to consider when thinking about re-financing. Depending on what you obtained your mortgage for in the first place, finding a lower interest rate to refinance with should be an easy task especially if you have all of the information that you need. It doesn’t need to be a challenging or daunting task to refinance a mortgage, especially with the help of Smarter Loans.

In Canada, a mortgage refinance is made simple by Smarter Loans. We are prepared to guide you through refinancing your mortgagee entirely online. Refinancing your mortgage online greatly reduces the amount of time and energy required, especially since paperwork and wait times have been drastically reduced. We’ve already laid the groundwork by neatly organizing all of the refinancing options for mortgages into a directory below. If it’s a mortgage that you are interested in, all you need to do is scroll down and you’ll be able to compare all kinds of mortgage financing options that apply to your unique case.

Once you identify the one that works for you, simply click “apply now” and you’ll be able to apply to refinance your mortgage with the interest rate that you desire. If the information laid out is overwhelming or confusing, you can also alternatively pre-apply with Smarter Loans and we’ll take care of the application on your behalf by finding a suitable option for you refinance your mortgage with.

We can help connect you with the top mortgage refinancing providers in Canada.

Pre-Apply For Mortgage Refinancing

Top Mortgage Refinancing Providers in Canada

Interest Rate
$20,000 - $10 Million
6 months - 5 years
$10,000 and up
Varies (Home Equity Loans)
12 Months
$20,000 - Unlimited
12 to 60 months
$50,000 and Up
1 - 10 years
$50,000 and up
Rates starting at 5.44%
5 years

What is a Mortgage Refinance and How Does it Work?

A mortgage refinance entails substituting your current mortgage with a new loan, typically with more favorable terms. It involves using the funds from the new loan to pay off the existing loan. The refinancing process involves several steps, including assessing your financial situation, shopping for a new loan, and closing the existing loan.

The Motivations Behind Refinancing

Debt Consolidation:

A common motivation for refinancing is to consolidate high-interest debt. A mortgage rate is typically lower than those on credit cards or other unsecured debt, making consolidation through refinancing an attractive option. You can either take out a new mortgage to cover your existing mortgage and outstanding debt, or establish a separate reverse mortgage for the debt you’re incorporating into your mortgage. This loan will usually have a lower monthly payment and can help you pay off any debt obligations including a car loan.

Accessing Equity:

Another reason to refinance is to access your home’s value. A home equity line of credit allows you to borrow up to 65% of your home’s value, provided your mortgage and home equity line combined do not exceed 80% of the property’s value. However, this usually requires switching from a standard charge mortgage to a collateral charge mortgage, which can complicate the same lender switching at renewal time and potentially incur additional costs.

Lower Mortgage Rates:

If you’re locked into a higher rate with a fixed-rate mortgage, you might consider refinancing to capitalize on a lower mortgage rate. Refinancing also presents an opportunity to extract equity from your property.

The Process of Refinancing

Refinancing necessitates passing the mortgage stress test, which means qualifying at your mortgage rate plus 2% or the Bank of Canada’s five-year benchmark rate, whichever is greater. If you’ve accumulated additional debt or if your income has decreased since your initial mortgage approval, refinancing may not be an option.

Additionally, refinancing often involves legal costs and mortgage penalties. It’s crucial to weigh these costs against potential savings before breaking your existing mortgage contract.

Types of Refinancing

Rate and Term Refinance:

This involves adjusting the interest rate, loan term, or both on your current mortgage. It’s typically considered when interest rates fall, allowing you to save money on your monthly payment.

Cash-Out Refinance:

In this case, the new loan amount is greater than the existing mortgage balance. The difference can be used for various purposes, like paying off credit card balances or car loans, thereby consolidating debt obligations.

Cash-In Refinance:

This is the opposite of a cash-out refinance, where you pay down your mortgage balance to a desired amount. It may increase your home’s value, lower your monthly repayments, or remove mortgage insurance.

Refinancing can offer significant advantages, like decreased monthly repayments, consolidating your debt, and borrowing money using your home’s value. It’s important to consider all aspects, including the refinancing process, comparing refinance offers, and assessing your credit history before making a decision. Always consult with a mortgage lender or broker to understand your options better.

Exploring the Benefits of Mortgage Refinance

Refinancing a mortgage can offer numerous benefits, tailored to improve your financial situation. These advantages range from accessing lower interest rates to consolidating your debt, extending over different aspects of your financial life.

Lower Interest Rate and Monthly Payments

Opting for a mortgage refinance often enables borrowers to take advantage of a lower interest rate. This can lead to significant savings over the loan term, reducing your monthly payment and making it more manageable. The refinance process allows you to adjust the terms of your existing loan to suit your current financial needs and market conditions.

Access to Cash with Cash-Out Refinance

If you’ve built up enough equity in your home, a cash refinance allows you to borrow more than your current mortgage balance, using your home’s equity. This provides an influx of cash, which could fund home renovations, pay for a child’s education, or supplement retirement income.

Debt Consolidation

Refinancing can be a powerful tool to consolidate high-interest debts, such as credit card debt or car loans. By rolling these debts into your mortgage loan, you could secure a significantly lower interest rate, simplifying your debt management with a single monthly payment.

Switching from an Adjustable-Rate to a Fixed-Rate Loan

Refinancing allows you to switch from an adjustable-rate mortgage, with fluctuating interest, to a fixed-rate loan, offering a steady and predictable monthly payment. This can be particularly beneficial if you anticipate that the interest rate will rise in the future.

Improved Loan Term

Mortgage refinance can help you tailor your loan term according to your financial goals. For instance, you may choose to shorten your loan term with a fixed-rate mortgage to pay off your mortgage early, resulting in significant savings on interest over time. Conversely, extending the loan term can reduce your monthly payments, easing your immediate financial burden.

Access to Different Lenders

Lastly, refinancing your mortgage gives you the opportunity to switch to a new lender who may offer more favorable terms, better customer service, or more suitable mortgage products for your needs.

While the benefits of refinancing are appealing, it’s essential to consider closing costs, your credit report, and the potential impact on your home’s equity. It’s advisable to consult with mortgage lenders or brokers to weigh the pros and cons carefully. Ultimately, a well-planned refinance can be a strategic move towards a more secure financial future.

The Potential Drawbacks of Mortgage Refinance

While a mortgage loan can offer numerous benefits, it’s crucial to be aware of its potential disadvantages as well. From closing costs to potential impacts on credit, refinancing is a significant decision that should be taken with careful consideration.

Closing Costs and Borrowing Expenses

Refinancing a mortgage involves closing costs just like your original mortgage loan. These costs can include application fees, origination fees, and appraisal costs, among others. It’s vital to consider these borrowing costs when evaluating whether refinancing is the right financial move for you.

Extension of Loan Term

While refinancing can reduce your monthly payment, it may also extend your loan term, leading to more interest paid over the life of the loan. For instance, if you choose a rate and term refinance to lower your monthly payment, you might end up with a longer repayment period and potentially higher overall borrowing costs.

Loss of Equity

In a cash-out refinance, where you borrow more than your current mortgage balance, you trade a portion of your home equity for cash. This could potentially leave you with less equity in your home, which might be a disadvantage if property values decrease or if you plan to sell your home in the future.

Potential Impact on Credit

Refinancing a mortgage requires a hard inquiry on your credit report, which could temporarily lower your credit score. Additionally, if you’re consolidating debt through refinancing and continue to accumulate Visa card debt, it could further negatively impact your credit score.

Penalties for Early Payment

Some mortgage loans carry penalties for paying off the loan early. It’s important to understand the terms of your existing loan and whether an early payoff could incur additional costs.

Rate Fluctuations

Refinancing from a fixed-rate mortgage to an adjustable-rate mortgage can present risks if the interest rate increase in the future. This could result in higher monthly payments, potentially straining your finances.

The decision to refinance should be based on a comprehensive understanding of both the advantages and disadvantages. It’s wise to consult with mortgage lenders or financial advisors to fully explore your options and make an informed decision that aligns with your long-term financial goals.

Frequently Asked Questions About Getting a Mortgage Refinance

What is mortgage refinancing?

A mortgage refinance is when a property owner ends their current mortgage agreement, and takes out a new one in its place. The new mortgage does not need to be for the same amount as the old one, and it does not need to be with the same company, but it must be for the same property. This is why it is a “refinancing,” and it differs legally from selling your home, closing out your old mortgage through the sale, and then purchasing a new home with a new mortgage. In effect, a mortgage loan is a way to reset your mortgage in its entirety while remaining where you are.

Why do people refinance their mortgage?

People refinance their mortgage for many different reasons, including:

  • Accessing a lower interest rate, if rates have dropped since the original mortgage was taken out, to save money on interest over the life of the loan
  • Accessing equity in the home
  • Consolidate debt (particularly useful if you have high interest debt burdens)
  • Problems with their current lender
  • Desire to change loan terms, such as duration

What does it mean to access equity in my home?

Equity, the mortgage-free portion of your property, increases as property values rise and mortgage payments decrease. Many opt to refinance their mortgage loan, leveraging this equity for available cash, effectively lowering monthly mortgage payments or consolidate debt, often at a beneficial refinance rate.

What can I use mortgage refinancing funds for?

When you refinance a mortgage, it allows you to unlock funds which can be allocated to diverse needs such as home renovations, consolidating high-interest debts like car loans, covering significant expenditures like tuition fees, supporting a business venture, or even financing another property purchase.

However, the principal objective of a mortgage loan is to settle the existing mortgage, including any prepayment penalties. The leftover money after refinancing your mortgage, facilitated by your home equity loan or a different lender, can be utilized according to your financial plans. This process could also potentially result in lower the monthly mortgage payment, improving your overall cash flow. Remember, the refinance rate and terms are crucial in determining the benefits of this decision.

How much can I borrow when refinancing my mortgage?

In Canada, most people are able to borrow up to 80% of their property’s value with a mortgage. So when refinancing, you need to understand your home’s current market value, and 80% of this figure will be your maximum borrowing amount. Remember that you will need to pay back your old mortgage as soon as you get your new one, so the total amount you’re left with after refinancing depends on your old mortgage’s value and any penalties you have to pay.

How much does mortgage refinancing cost?

Refinancing a mortgage isn’t free and involves costs like prepayment penalties, which vary based on the mortgage type. Fixed rate mortgages generally incur higher penalties, averaging around $12,000, whereas a variable rate mortgage charge about three months’ interest. It’s crucial to review your current mortgage agreement and consider these costs, including valuation and legal fees for the new loan, which typically total around $1,500. These expenses could affect your monthly payment and the overall affordability of the refinanced mortgage, so it’s important to assess them before proceeding.

What’s the best time to refinance my mortgage?

Deciding when to refinance your mortgage depends on various personal and financial factors. It’s crucial to consider your existing loan’s interest rate, potential refinance rate, and any penalties for breaking your mortgage agreement. Remember, refinancing rates aren’t the same as new purchase rates.

Calculating these factors against potential savings on your monthly payment over the refinance term will help determine if refinancing is cost-effective. Refinancing can help lower monthly payments, or even provide a lump sum to pay off debts like car loans or to put into savings accounts. It’s essential to analyze these aspects with a different lender or a home loan expert before proceeding with a refinanced mortgage.

What are the alternatives to mortgage refinancing?

Accessing home equity or consolidating debt without refinancing a mortgage can be achieved through home equity lines of credit (HELOCs) or second mortgages. A HELOC leverages your home’s equity as a separate loan, allowing you to borrow money as needed. A second mortgage, offered by your current or a different lender, might provide a “blended” interest rate, combining your first and second mortgage rates.

However, be cautious, as these blended rates could be higher than the refinance rate. Decreased monthly payments and an influx of cash for savings, paying off car loans, or other purposes can be benefits of these methods. Still, each decision should be made considering your unique situation, mortgage payment capacity, and long-term effects of the mortgage registration.

How do I refinance my mortgage?

  1. Identify your goal for refinancing – cash out, better terms, lower rate, etc.
  2. Research your current mortgage’s prepayment penalties so you know how much refinancing will cost you. If your costs will be very high, consider whether refinancing is your best option.
  3. Understand the current value of your home and current mortgage debt to get a rough idea of how much you can borrow with a new mortgage.
  4. Research the refinancing interest rate to understand what your new monthly mortgage costs will be. Shop around, as different lenders may have quite different rates and loan terms.
  5. Choose a lender and complete an application form. This is often a very easy step, as most lenders will walk you through your application. You will need some financial and personal documentation on hand to support your application (as you did when taking out your original mortgage).
  6. If your new mortgage is approved, review the mortgage agreement to understand the new terms, and if you’re happy, sign it. Everything will be set up so that your old mortgage is automatically closed on the same day that your new mortgage takes effect, and your old mortgage plus fees will be paid off at this time. Any remaining funds will then be deposited into your bank account.

Remember that if you’re struggling to understand your options and choose the best new mortgage, you can talk to a broker or one of our experts for free advice and recommendations.

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