Looking for Mortgage Refinancing Options in Ontario?

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The short answer is yes—you can refinance your mortgage at any time. But the better question is: should you refinance right now?

Refinancing means replacing your current mortgage with a new one, often to get a better rate, access home equity, or change your mortgage terms. While lenders generally allow you to refinance whenever you want, doing so isn’t always free—and depending on your situation, it might cost you more than it saves.

Let’s break down how refinancing works in Canada, what it might cost you, and when it makes sense to explore other options—like a second mortgage or HELOC—instead.

Yes, You Can Refinance Anytime—With a Catch

Technically, you don’t have to wait for your mortgage term to end in order to refinance. If your mortgage is with a lender in Canada, you can break your contract early and sign a new one—either with your current lender or a different one.

But there’s a catch: you’ll likely have to pay a prepayment penalty. That penalty is a fee charged by your lender to make up for the interest they’ll lose by letting you out of the contract early.

There are two common types of prepayment penalties in Canada:

Three months’ interest (usually for variable-rate mortgages)

Interest Rate Differential (IRD) (usually for fixed-rate mortgages)

IRD can be much higher than three months’ interest, especially if you locked in at a higher rate and current rates are much lower. It’s based on a formula that compares your original rate to what your lender can lend the money out for today.

So while yes—you can refinance at any time—the timing matters a lot if you want to avoid a large penalty.

Penalties for Monoline Lenders vs. Big Banks

One important detail many homeowners don’t realize: not all lenders charge penalties the same way.

If your mortgage is with one of the major banks (like RBC, TD, Scotiabank, etc.), your penalty—especially under the IRD method—tends to be much higher. These banks use their posted rates to calculate your penalty, which inflates the IRD amount.

On the other hand, monoline lenders (like First National, MCAP, or RFA) usually base their penalty calculations on discounted rates, which are much closer to what you actually paid. This often results in a significantly smaller penalty for fixed-rate mortgages.

This is one reason many mortgage brokers prefer monoline lenders—they can offer more flexible options if you ever need to break your mortgage early.

So before you refinance, it's worth checking:

Who your lender is

Whether you’re in a fixed or variable mortgage

How much time is left in your term

How they calculate penalties

A broker can help you estimate the actual cost to break your mortgage and determine if it makes financial sense.

What If You Want to Keep Your First Mortgage?

Let’s say you like your current mortgage. Maybe you locked in a great rate a year or two ago. But now you need some extra cash—for renovations, debt consolidation, or a major purchase.

Instead of refinancing and losing that low rate (and paying a penalty), you might consider a second mortgage.

This is where a product like a HELOC (Home Equity Line of Credit) or private second mortgage comes into play. These allow you to access equity in your home without touching your existing mortgage.

A second mortgage sits behind your first mortgage in priority, but gives you access to new funds. Here’s how it works:

You borrow a new, separate amount (e.g., $50,000) based on your home’s value

Your first mortgage remains unchanged

You repay the second mortgage separately, usually with interest-only payments

This strategy is useful when:

Your first mortgage has a very low rate you want to keep

You’re early in your mortgage term and the penalty to break is too high

You only need a relatively small amount of extra cash

While the rate on a second mortgage is usually higher than your primary mortgage, the overall cost can still be lower once you factor in the penalty savings.

A mortgage broker can help compare both options so you can decide which one gives you better value.

When Does Refinancing Make Sense?

Here are some scenarios when refinancing might be worth the penalty:

You want to consolidate high-interest debt

If you're paying 20%+ on credit cards, refinancing to roll that into your mortgage at 6%–8% could save you hundreds per month—even after paying a penalty.

You want to pull out a large amount of equity

For major expenses like full-home renovations, business investments, or large purchases, refinancing might offer a better rate and repayment structure than a second mortgage.

Your credit or income has improved

If your financial profile is stronger than when you first got your mortgage, you may now qualify for a better rate or better terms, making refinancing a good long-term decision.

You’re near the end of your term

The closer you are to the end of your mortgage term, the smaller the penalty tends to be—making it more worthwhile to consider refinancing early.

You want to switch lenders for better features

Some mortgages come with restrictions or lack flexibility (like prepayment privileges or portability). If your current mortgage feels limiting, switching might be worth the cost.

Talk to a Mortgage Broker Before Making a Move

Refinancing your mortgage isn’t a small decision, and the numbers can get confusing quickly. A mortgage broker can help break it down for you—at no cost.

They’ll:

Run the penalty calculations with your current lender

Shop around for better rates or terms

Compare refinancing with alternatives like HELOCs or second mortgages

Help you weigh the pros and cons based on your personal situation

More importantly, they’ll help you avoid common pitfalls—like refinancing for the wrong reasons, overborrowing, or getting stuck in an inflexible mortgage again.

So before you pull the trigger, talk to someone who can walk you through all your options clearly and honestly.

Steps to Refinance Your Mortgage in Canada

If you decide that refinancing is the right move, here’s what the process generally looks like:

1. Connect with a Mortgage Broker

Start by speaking with a licensed mortgage broker. They’ll help you:

Review your current mortgage terms

Estimate any prepayment penalties

Understand how much equity you can access

Shop around for better offers and lender options

Working with a broker gives you access to a wider range of lenders—not just the big banks—and often better rates or more flexible products.

2. Collect Your Documents

Just like when you first got your mortgage, you’ll need to gather key documents for your application. These typically include:

Government-issued ID

Recent mortgage statement

Property tax bill

Proof of income (pay stubs, job letter, T4s or Notice of Assessment)

Credit report (your broker will usually pull this for you)

Details of any debts you want to consolidate

Recent property appraisal (in some cases)

If you're self-employed or have multiple income sources, you may need to provide additional documentation such as full tax returns or business financials.

3. Appraise the Property

Most lenders will require a professional appraisal to confirm your home's current market value. This helps them calculate your loan-to-value ratio (LTV) and ensure you meet their lending criteria.

The appraisal typically costs between $350–$500 and can take a few days to complete. Your broker will coordinate this step on your behalf.

4. Choose the Right Product

Once you’ve been pre-approved, your broker will present you with the available options. These might include:

A new fixed or variable mortgage with a better rate

A blended mortgage (mixing your old and new rates to avoid penalties)

A refinance with cash-out equity

Switching to a lender with better features or flexibility

Make sure to review not only the interest rate but also:

Amortization length

Prepayment privileges

Portability

Closing costs

Penalty structures for breaking early

5. Close the New Mortgage

Once you’ve chosen the product, the final documents are prepared. You’ll sign the new mortgage contract and close through a real estate lawyer or notary. They’ll:

Pay off your existing mortgage

Register the new mortgage

Transfer any extra funds (if you’re borrowing additional equity)

The entire refinancing process typically takes 2–3 weeks from start to finish—sometimes a bit longer if there's complexity in your income, credit, or documentation.

Tips for a Smooth Refinance

To make the refinancing process easier and less stressful, keep these tips in mind:

Know your current mortgage terms. Get familiar with your prepayment penalty and how much time is left in your mortgage term before jumping in.

Don’t wait until the last minute. If your mortgage is coming up for renewal, start shopping early—about 90–120 days before the maturity date—to lock in your next term.

Check your credit. The better your credit score, the more options you’ll have—and the better your rate will be. If your score needs work, consider holding off and improving it first.

Don’t overextend. Just because you can borrow more doesn’t mean you should. Make sure the new payments are manageable and align with your goals.

Think long-term. Consider how long you plan to stay in your home and what life events might be coming. Refinancing now might help you avoid future costs or stress.

Common Mistakes to Avoid

Refinancing can be a powerful tool, but it’s not always the right move. Avoid these common mistakes:

Breaking your mortgage too early without doing the math. The penalty could eat up any savings, so always compare your cost vs. benefit.

Focusing only on interest rate. Other features—like prepayment flexibility, term length, and fees—can have just as big an impact on your finances.

Not exploring second mortgage options. If you only need a smaller amount, a HELOC or second mortgage might be cheaper than refinancing your entire mortgage.

Not using a broker. Going straight to your bank might mean missing out on better rates or products. A broker gives you more choice and helps you make an informed decision.

Can You Refinance Your Mortgage at Any Time?

Technically yes. But whether it’s the right time depends on your situation.

If you’re facing high-interest debt, need to access home equity, or want to secure better terms, refinancing could be a smart move. Just be sure to consider the penalty, compare options, and understand the impact on your overall finances.

Most importantly, speak with a mortgage broker. They’ll help you crunch the numbers, shop the market, and choose the strategy that works best for your needs.