Refinancing in Ontario at a glance
- 80%
- Maximum loan-to-value
- 3-5
- Weeks to funding
- $0
- Land transfer tax
- 50+
- Lenders compared
90% when building a legal secondary suite
Days through a private lender
Refinancing does not change ownership
Banks, monolines, B and private
Mortgage refinance rates in Ontario are not the rates you see advertised
Comparison sites lead with insured, high-ratio rates - the best insured 5-year fixed in Ontario sat near 3.99% in July 2026. You cannot get that on a refinance. Refinances are uninsured by definition, because default insurance is not available when you take equity out.
Expect a premium of roughly 0.25% to 0.75% over the headline insured rate. The Bank of Canada held its policy rate at 2.25% on July 15, 2026 - the sixth consecutive hold - leaving prime at 4.45%. Fixed refinance rates track the 5-year Government of Canada bond yield, currently 3.18%, not the policy rate.
Next Bank of Canada decision: September 2, 2026
Ontario 5-year fixed refinance rates
| Lender type | 5-year fixed rate |
|---|---|
| Best available (broker channel)Uninsured, strong credit, ≤65% LTV | 4.49% |
| Big 5 bank (lowest discount)Scotiabank led the Big 5 in July 2026 | 4.49-4.59% |
| Canadian average, conventionalWhat most borrowers actually sign | ≈5.07% |
| B-lender / alternativeBruised credit or non-standard income | 4.89-7.50% |
| Private lenderEquity-based, short term, fast close | 6.49-12.00%+ |
Rate data as of July 25, 2026. Rates change daily and are subject to qualification.
What is mortgage refinancing, and how is it different from renewing?
If your mortgage no longer fits your finances, refinancing lets you rewrite the terms - but it is a different transaction from a renewal, and the difference costs money.
Refinancing means breaking your existing mortgage contract before it matures so you can change the loan amount, the interest rate, the amortization or the lender. It replaces your current mortgage with an entirely new agreement, usually for a higher principal.
A renewal happens automatically at maturity, keeps your balance unchanged, and carries no penalty. Because a refinance breaks a live contract, a penalty almost always applies - and that penalty is the single variable that decides whether the move is worth making.
Chasing a better rate at maturity? Start with renewals| Refinance | Renewal | |
|---|---|---|
| Timing | RefinanceBreaks the contract before maturity | RenewalHappens automatically at maturity |
| Balance | RefinanceCan increase, up to 80% LTV | RenewalStays exactly the same |
| Penalty | RefinanceAlmost always applies | RenewalNone |
| Qualifying | RefinanceFull re-qualification and stress test | RenewalNo stress test on a straight switch |
| Amortization | RefinanceCan be reset, up to 30 years | RenewalContinues unchanged |
Mortgage prepayment penalties: what breaking your mortgage early costs
The penalty is the largest and least predictable line in any refinance. Which formula applies depends entirely on your rate type.
Variable rate
Three months' interest
Balance × rate ÷ 4. Predictable and comparatively cheap. On a $500,000 balance at 4.45%, roughly $5,560.
Variable holders have far more freedom to refinance mid-term.
Fixed rate
Greater of three months' interest or IRD
The Interest Rate Differential compares your rate to today's rate for your remaining term. The Big 6 calculate it against posted rates, not your contract rate, which can inflate the result several times over.
Same balance, same term, different lender: the monoline-to-Big 6 gap is routinely $15,000 or more.
Worked example: which formula wins
$500,000 · 5.49% contract · 2 years left · 4.19% comparable
- Three months' interest
- $6,863
- Interest Rate Differential
- $13,000
- Penalty charged
- $13,000
500,000 × 5.49% ÷ 4
500,000 × 1.30% × 2 yrs
The greater of the two
Three months' interest is calculated at your contract rate, not today's rate - a detail most online calculators get wrong. This example also uses a discounted comparison rate. Run the same file through a Big 6 posted-rate IRD and the penalty can land north of $30,000.
The five-year cap most borrowers never hear about
Under section 10 of the federal Interest Act, once five years have passed since your mortgage was originally advanced, the maximum penalty your lender can charge is three months' interest - the IRD no longer applies. The clock runs from the original advance date, not your current term. If your mortgage was first advanced before July 2021, verify this before accepting any IRD quote.
How much home equity can you access in Ontario?
A standard Ontario refinance caps total mortgage debt at 80% of appraised value. On a $900,000 home in Markham or Mississauga, that is $720,000 - less your existing balance.
Since January 2025 there has been one exception. The insured refinance for secondary suites allows up to 90% of the as-improved value on properties under $2 million, with amortization up to 30 years - but the funds must build a legal additional unit. Equity takeout is not permitted, and the suite cannot be a short-term rental.
LTV is only half the test. You also have to clear the debt service ratios - roughly 39% GDS and 44% TDS, measured at the stress-test rate rather than the rate you will actually pay.
Standard refinance
80%
Uninsured, any purpose, all of Ontario
Insured refinance - secondary suite
90%
As-improved value, property under $2M, construction only
Standalone HELOC
65%
OSFI cap in first position
How to refinance a mortgage in Ontario
Five steps from first phone call to funds in your account. The order matters - step one decides whether the rest is worth doing.
- 01
Request your payout statement
Ask your current lender for a written payout statement showing the exact penalty. Verbal quotes are routinely wrong. This one document decides whether refinancing makes sense.
- 02
Run the break-even
Total costs divided by monthly savings. If break-even lands beyond your remaining term, stop - a second mortgage or HELOC is likely cheaper.
- 03
Compare lenders, not just rates
IRD formulas, prepayment privileges and portability differ enormously. A 0.05% lower rate at a lender using posted-rate IRD can cost far more at your next break.
- 04
Appraisal and approval
The lender orders an appraisal to confirm value and your 80% LTV ceiling, then re-qualifies you at the stress-test rate and checks your GDS and TDS ratios. Full approval typically follows within 5-10 business days at an A-lender.
- 05
Legal and funding
Your lawyer discharges the old charge, registers the new one, and pays out any debts being consolidated. Expect 3-5 weeks from application to funding at a bank, faster with a monoline or private lender.
Documents you'll need
- Recent mortgage statement and written payout statement
- Property tax bill showing the account in good standing
- Two recent pay stubs, or two years of T1 Generals and NOAs if self-employed
- Letter of employment confirming salary and tenure
- Photo ID and proof of home insurance
- Statements for any debts being consolidated
Mortgage refinance closing costs in Ontario
Every line below is predictable except the last one - and the last one is usually larger than all the others combined.
| Cost | Typical range | Notes |
|---|---|---|
| Property appraisal$300 - $600 | $300 - $600 | Almost always required on a refinance |
| Legal / closing fees$1,000 - $1,800 | $1,000 - $1,800 | New charge must be registered on title |
| Mortgage discharge fee$200 - $400 | $200 - $400 | Charged by your outgoing lender |
| Land registration≈ $161 | ≈ $161 | About $80 per document - one discharge, one new charge |
| Title insurance$250 - $500 | $250 - $500 | Required by most Ontario lenders |
| Prepayment penalty$2,000 - $25,000+ | $2,000 - $25,000+ | The variable that decides everything |
How to calculate your break-even point
Total costs divided by monthly savings gives you the number of months until the refinance pays for itself. If that number lands past the end of your term, waiting wins. Two files, same balance, opposite answers:
Debt consolidation - worth it
$500,000 variable mortgage · $60,000 of cards and lines of credit at ~20%
- Monthly interest saved
- ≈ $775
- Penalty plus closing costs
- ≈ $9,100
- Break-even
- ≈ 12 months
Twelve months sits comfortably inside a five-year term. This refinance pays for itself.
Rate-only, mid-term - wait
Same $500,000 balance · 1.30% rate improvement · 2 years left on a fixed term
- Monthly interest saved
- ≈ $542
- IRD plus closing costs
- ≈ $15,200
- Break-even
- ≈ 28 months
Twenty-eight months against twenty-four remaining. Waiting for renewal is the better call - and we will tell you so.
No land transfer tax on a refinance. Ontario land transfer tax - and Toronto's additional municipal land transfer tax - apply to a change of ownership, not to registering a new mortgage charge. Refinancing triggers neither.
When to refinance your mortgage - and when to wait
Four situations account for most Ontario refinances. Each one carries a different break-even, and one of them is usually free to do without refinancing at all.
Consolidating high-interest debt
Rolling credit cards, lines of credit and personal loans into your mortgage swaps roughly 20% unsecured interest for roughly 5% secured interest, and replaces several payments with one. This is the scenario that most often survives a break-even test, because the interest gap is wide enough to recover even a large penalty quickly.
Funding a renovation or investment property
Equity you have already built can pay for a kitchen, a basement suite, or the down payment on a second property - at mortgage rates rather than unsecured or construction-loan rates. If the project is a legal secondary suite, check the 90% insured program before defaulting to an 80% refinance.
Switching between variable and fixed
When rate expectations shift, refinancing lets you change rate type before your term ends. Ask your existing lender first - most variable products allow a free conversion into a fixed term at any time, which achieves the same result with no penalty and no legal costs.
Adding or removing someone from title
Separation, marriage, or bringing on a co-signer to qualify for more room all require a refinance, because both the title and the mortgage contract have to be reissued in the new names. A spousal buyout can go to 95% LTV under the insured matrimonial payout program, which most borrowers never hear about.
Usually worth running the numbers
- You carry $30,000+ in credit cards or lines of credit at 15-22%
- Your mortgage was first advanced over five years ago, capping the penalty
- You hold a variable rate, so the penalty is three months' interest
- You are within six months of renewal and can often break penalty-free
- You are adding a legal secondary suite and qualify for 90% LTV
Usually better to wait or stay in second position
- You are early in a fixed term with a Big 6 posted-rate IRD
- Your existing rate is already at or below current market
- Break-even lands beyond your remaining term
- You need under $50,000 - a HELOC is usually cheaper to set up
- Your income has changed and you would fail the 5.25% stress test
Refinance vs. second mortgage vs. HELOC
The deciding factor is almost always the size of your penalty relative to the amount you need. Small amount and a large penalty: stay in second position. Large amount and a capped penalty: refinance.
| Refinance | Second mortgage | HELOC | |
|---|---|---|---|
| What it is | RefinanceReplaces your existing mortgage entirely, at a new rate and balance | Second mortgageA separate loan registered behind your first mortgage | HELOCA revolving credit line secured against your equity |
| Best for | RefinanceConsolidating debt or resetting your rate when the penalty is manageable | Second mortgageAccessing equity fast without touching a low first-mortgage rate | HELOCOngoing or flexible access to funds, drawn as needed |
| Prepayment penalty | RefinanceUsually yes, on your existing mortgage | Second mortgageNone on your first mortgage | HELOCNone on your first mortgage |
| Rate type | RefinanceFixed or variable, set at closing | Second mortgageTypically higher, fixed term | HELOCVariable, tied to prime; interest only on what you draw |
| Approval speed | Refinance3 - 5 weeks (full re-qualification) | Second mortgageOften days, especially through private lenders | HELOCDays to weeks, subject to lender approval |
| Maximum LTV | Refinance80% of appraised value | Second mortgageUp to 85 - 90% through private lenders | HELOC65% standalone, 80% combined with a first |
Related mortgage solutions
Second mortgage
Access equity without breaking your existing rate or paying a penalty on the first.
HELOC
A revolving line against your equity, with interest charged only on what you draw.
Private financing
Equity-based approvals in days when timing, income or credit rules out an A-lender.
Mortgage renewal
Within six months of maturity? Read this before you sign your bank's first offer.
Mortgage refinancing in Ontario: common questions
What is the difference between refinancing and renewing a mortgage?
A renewal happens automatically when your term matures: you sign a new term on the same balance, with no penalty and no re-qualification if you stay put. A refinance breaks a live contract before maturity so you can change the amount, the rate, the amortization or the lender. Because it breaks the contract, a prepayment penalty applies and you re-qualify from scratch. If you only want a better rate at maturity and are not taking equity out, you want a renewal or a switch, not a refinance.
How long does it take to refinance a mortgage in Ontario?
Three to five weeks from application to funding at a major bank, and often faster with a monoline lender. Private lenders can fund in three to five business days. The slowest steps are almost always the appraisal and your existing lender producing the payout statement, so request that statement on day one.
Does refinancing require the mortgage stress test?
Yes. Refinancing is a new mortgage application, so you must qualify at the greater of 5.25% or your contract rate plus 2%, and your Gross Debt Service and Total Debt Service ratios are reviewed again. This differs from a straight switch at renewal, which has been exempt since late 2024 provided the balance and amortization don't increase. If you only want a better rate and aren't taking equity out, a switch is far easier to qualify for.
Is it worth paying a penalty to refinance for a lower rate?
It depends entirely on your break-even point. Divide your total costs by your monthly savings to get the number of months needed to recover them. If that lands beyond the end of your current term, waiting for renewal wins. Rate-only refinances mid-term frequently fail this test, because saving 1% on a balance recovers a posted-rate IRD slowly. Debt consolidation refinances usually pass it, because the gap between mortgage and credit card interest is several times larger.
How is a mortgage prepayment penalty calculated in Canada?
On a variable-rate mortgage it is three months' interest on your balance, calculated at your contract rate. On a closed fixed-rate mortgage it is the greater of three months' interest or the Interest Rate Differential. The Big 6 banks calculate IRD against their posted rates rather than your contract rate, which can inflate the penalty several times over compared with a monoline lender or credit union.
Is there a cap on how large my prepayment penalty can be?
Yes, and it is widely overlooked. Under section 10 of the federal Interest Act, once five years have passed since your mortgage was originally advanced, the maximum penalty is three months' interest - the IRD no longer applies. The clock runs from the original advance date, not your current term, so a mortgage first advanced before July 2021 is capped even if you have renewed since.
Do I pay Ontario land transfer tax when I refinance?
No. Land transfer tax applies to a transfer of ownership, not to registering a new mortgage charge. Refinancing does not change title ownership, so neither the provincial land transfer tax nor Toronto's additional municipal land transfer tax applies. That is a meaningful saving compared with selling and rebuying.
Should I refinance or take a second mortgage instead?
If you are mid-term with a low rate on your first mortgage, breaking it can cost more than the savings are worth. A second mortgage or HELOC leaves the first untouched and charges interest only on the new money. Refinancing tends to win when your existing rate is above current market, when your penalty is capped at three months' interest, or when you are within about six months of renewal.
Can I refinance my mortgage if I am self-employed in Ontario?
Yes. Banks want two years of steady tax-return income, but B-lenders offer stated income and bank statement programs that assess gross business revenue or 12 to 24 months of deposits instead. Rates run higher than A-lender pricing, though usually far below private lending.
Can I refinance with bad credit?
Equity matters more than credit score in the alternative and private channels. With 25% or more equity, private lenders will generally approve on the strength of the property, with credit affecting your rate rather than whether you are approved. Expect 8% and up plus lender and broker fees, and treat it as a one- to two-year bridge while you repair credit.
Find out what your refinance actually costs
Start with the calculator, then let us pull your real payout statement and run the break-even against 50+ lenders. If waiting for renewal is the better move, we'll tell you that.
Mortio Financial Corp
Toronto, Mississauga, Markham, Brampton and all of Ontario
