Products and terms
Refinance
Replacing your mortgage with a larger one and taking the difference in cash, capped at 80% of the property's value.
A refinance breaks your existing mortgage and replaces it with a new, larger one. You can use the extra money for whatever you need: consolidating debt, renovating, buying out a spouse or funding another purchase.
OSFI Guideline B-20 caps a refinance at 80% of appraised value. A refinance can never be default-insured, so it's always priced in the uninsured tier. That alone often pushes the rate up for borrowers moving from an insured mortgage.
Refinancing mid-term triggers a prepayment penalty. Get the exact figure in writing from your lender, then work out the break-even: total cost divided by monthly saving, in months. If that's shorter than the time you'll keep the mortgage, the refinance pays off. If it's longer, it doesn't.
Watch the amortization. Resetting a mortgage with 18 years left back to 25 lowers the payment and adds years of interest.
Related terms
Prepayment penalty
The charge for paying off a closed mortgage early: 3 months of interest on a variable, or the greater of that and the IRD on a fixed.
Loan-to-value (LTV)
The mortgage as a percentage of the property's value, which decides your insurance, your pricing tier and how much you can borrow.
Equity
The difference between what your home is worth and what you still owe on it.
This definition describes how the term is used in Canadian residential mortgage lending. It’s general information, not advice on your file. Rules, thresholds and rates change. Where a figure is quoted, it’s current as of the date shown on the related guide.
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