7 Questions to Ask Before Refinancing Your Mortgage in Canada (2026)

Refinancing replaces your existing mortgage with a new one, ideally on better terms. In 2026 it can lower your rate, unlock equity, or consolidate debt — but it can also trigger a penalty that wipes out the benefit. Run through these 7 questions before you decide, so you refinance only when the math is clearly in your favour.

The short answer

Refinance when the savings or strategic benefit clearly beats the cost of breaking your mortgage. The decision comes down to your goal, the penalty to break, the break-even period, how much equity you can actually access, the rate type on the new loan, the closing costs, and whether a cheaper alternative like a HELOC exists. Work through all seven below.

• Be clear on why you're refinancing.
• Know your break penalty and break-even point.
• Confirm how much equity you can borrow (the 80% rule).
• Compare the cost against a HELOC or second mortgage.

1. What is my actual goal?

Pin down the reason before the rate. The three common goals are a lower interest rate, accessing equity for renovations or investing, and consolidating high-interest debt into one lower payment. Each goal changes how you measure success — a debt-consolidation refinance can win even at a higher rate if it slashes your monthly cash outflow.

Learn how the process works on our mortgage refinancing page.

2. What is the penalty to break my mortgage?

Breaking a closed mortgage mid-term triggers a prepayment penalty. On a variable mortgage it is usually three months' interest. On a fixed mortgage it is the greater of three months' interest or the interest rate differential (IRD), which can run into many thousands of dollars depending on your rate and time left.

Get your exact figure from your lender, then plug it into the mortgage refinance calculator.

3. What is my break-even point?

Your break-even is the time it takes for monthly savings to repay the penalty plus closing costs. Divide total upfront cost by your monthly saving. If you'll keep the home and mortgage past that point, refinancing pays off; if you might sell or move sooner, it often won't.

Example: $4,000 in costs and $200/month saved is a 20-month break-even.

4. How much equity can I access?

In Canada you can refinance up to 80% of your home's appraised value. Subtract your current mortgage balance from 80% of the value to estimate the equity you can withdraw. The remaining 20% must stay as equity — you cannot refinance to 95% the way some purchases allow.

So a $700,000 home allows roughly $560,000 in total borrowing, minus what you still owe.

5. Fixed or variable on the new loan?

The rate type resets when you refinance, so decide deliberately. Fixed gives payment certainty and protection if rates climb; variable can cost less if rates fall and usually carries a smaller break penalty later. Match the choice to your risk tolerance and how long you plan to hold the mortgage, not just today's headline rate.

Weigh the trade-offs in our fixed vs. variable guide.

6. What are the closing and legal costs?

Beyond the penalty, budget for an appraisal, legal or title fees, and possible discharge or registration charges. These typically total a few hundred to a couple thousand dollars. Some lenders offer to cover legal costs on a switch, so ask. Always count these in your break-even math, not just the rate saving.

An advisor can confirm which costs apply to your file.

7. Would a HELOC or second mortgage be cheaper?

If your main goal is accessing equity rather than re-rating the whole loan, you may not need to break your mortgage at all. A home equity line of credit or a second mortgage sits behind your existing first mortgage, leaving its rate and term untouched and avoiding the break penalty entirely.

Compare the full cost of each route before committing to a refinance.

Frequently asked questions

Does refinancing reset my amortization?

It can. Refinancing lets you choose a new amortization, which can lower payments but may increase total interest paid over time. You can also keep a shorter amortization to stay on track.

Will I have to pass the stress test again?

Yes. A refinance requires you to re-qualify, including the mortgage stress test, at the higher of your contract rate plus 2% or the qualifying rate set by regulators.

Can I refinance to consolidate debt?

Yes. Rolling high-interest credit cards or loans into your mortgage can lower your overall interest and monthly payment, provided you stay within the 80% loan-to-value limit.

How long does a refinance take?

Most refinances close within two to four weeks once your application, appraisal, and legal work are complete, though timelines vary by lender and file complexity.

Not sure which answer applies to you? Ask Maya for an instant read on your numbers, then book a call so an advisor can confirm the penalty, equity, and break-even before you commit. Contact us to get started.