A mortgage refinance is when you pay off your current mortgage and replace it with a new mortgage. This new mortgage may have a higher mortgage balance in order to borrow more money, or it may have a different interest rate, term, or mortgage type.
Your refinanced mortgage can be for up to 80% of the value of your home. Use the calculator below to find out how much you can borrow with a mortgage refinance.
Refinancing your mortgage to borrow more money involves using your home equity. If your current mortgage is less than 80% of the value of your home, you are able to refinance your mortgage up to 80% of your home’s value. The difference between the refinanced mortgage balance and your current mortgage will be the amount that you are borrowing.
If you don’t need to borrow a large amount of money all at once but would like to have the option available to you, a home equity line of credit (HELOC) can be a more flexible alternative to a refinance. HELOC rates are higher than refinance mortgage rates, but you only have to pay interest for what you actually borrow with a HELOC.
You can use this unlocked equity to consolidate debt or use the cash for any purpose, such as making home improvements or to travel.
Fixed-rate mortgages locks you into a set interest rate for the length of your mortgage term. If interest rates fall during your term, you won’t be able to benefit with a fixed mortgage until you either renew your mortgage at the end of your term or refinance during your term.
If you refinance before your mortgage is up for renewal, your mortgage lender can charge hefty mortgage penalties as you will be breaking your mortgage. To see whether you will be able to save money through a lower interest rate after mortgage prepayment penalties are charged, use our mortgage refinance calculator .
Refinancing your mortgage allows you to change all aspects of your mortgage. If you currently have a variable-rate mortgage and you think that interest rates will increase significantly in the near future, you might want to switch to a fixed-rate mortgage to lock-in a lower rate today. You can change from a variable-rate to a fixed-rate when you refinance your mortgage.
Some mortgage lenders offer mortgages that allow you to switch mortgage rate types all without refinancing or any penalties that come with refinancing. For example, CIBC ’s Variable Flex Mortgage is a variable-rate mortgage that can be converted at any time to a fixed-rate mortgage with a term of at least three years.
First, check to see if a mortgage refinance is right for you, or if there are better alternatives available. If you’re refinancing to get a lower interest rate, check to see if your interest savings would be more than any mortgage penalties that you would have to pay. If you’re looking to borrow more money, your refinanced mortgage can’t be greater than 80% of your home value.
Once you have determined why you want to refinance and what you want to change, shop around with different mortgage lenders and mortgage brokers. You do not have to refinance and stay with your current mortgage lender. Other lenders may offer lower mortgage refinance rates than your current lender. However, switching lenders can come with fees, such as discharge fees.
Refinancing your mortgage is just like applying for a new mortgage. You'll need to have your pay stubs, tax returns, and statements to provide to your lender. You’ll need to pass the mortgage stress test at your new refinanced mortgage balance, and you will also need to have an home appraisal conducted.
Mortgage refinance costs include mortgage registration and legal fees, as you are replacing your current mortgage with a new mortgage. You will also need to pay for a home appraisal. Other costs depend on when you refinance and where you refinance.
If you refinance by switching to another lender, you will be charged a mortgage discharge fee. Discharging adds your new lender to your property title and removes your old lender from it.
If you are refinancing before your term is over, you will need to pay mortgage prepayment penalties depending on your mortgage type. For variable-rate closed mortgages, you will need to pay three months of interest as a penalty. For fixed-rate closed mortgages, the penalty is the greater of three months of interest or an interest rate differential. To calculate your mortgage break penalty, visit our mortgage penalty calculator.
Open mortgages have no prepayment penalties. You can also avoid prepayment penalties by refinancing your mortgage when your mortgage is up for renewal at the end of your term.