Mortgage refinancing means replacing your current mortgage with a new one, usually to lower your interest rate, change your terms, or borrow against the equity you have built in your home. In Ontario it is also a legal transaction, because a lawyer has to discharge your old mortgage and register the new one against your title before any money moves.
That second part is where homeowners get caught off guard. You can find the financial pros and cons of refinancing on any banking website. What is harder to find is how the Ontario side actually works, what it costs in registration and legal fees, and the rules that decide how much you can borrow and what penalty you pay to break your current term. This guide covers both sides, written from how we handle refinance files at our firm.
What is mortgage refinancing in Ontario?
Refinancing replaces your existing mortgage with a new one before the current term ends. Homeowners refinance for four main reasons. They want a lower rate, they want to pull equity out as cash, they want to combine high interest debts into one lower rate payment, or they want to change the structure of the loan, for example moving from a variable rate to a fixed rate.
A refinance is not the same as paying your mortgage off. The old loan is paid out and a brand new charge takes its place on title. Because the loan amount or the terms change, your lender treats it as a fresh application. You go through approval again, your income and credit are reviewed, and the property is usually appraised to confirm its current value.
In our practice the most common reason clients refinance is debt consolidation, often rolling a credit line or a high rate second mortgage into the first mortgage at a far lower rate. The second most common is funding a renovation.
Refinance, renewal, or a straight switch, what is the difference?
These three get mixed up constantly, and the difference changes what you can do and what it costs.
A renewal happens when your term ends and you sign on for a new term with your current lender. Nothing about ownership or the registered charge changes, and you usually do not need a lawyer.
A straight switch is when your term ends and you move the same balance to a new lender without increasing the loan or extending the amortization. A lawyer or a title service registers the new lender’s charge, but you are not borrowing more.
A refinance is when you break the term early, increase the borrowing, change the amortization, or pull out equity. This is the one that can carry a prepayment penalty and that always needs a lawyer to register the new charge.
| Feature | Renewal | Straight switch | Refinance |
|---|---|---|---|
| When it happens | At term end | At term end | Any time, often mid term |
| Can you borrow more | No | No | Yes, up to 80 percent |
| Penalty to break term | None | None | Often, if mid term |
| Lawyer needed | No | Usually | Yes |
| Stress test applies | No | No, for a straight switch | Yes, when the loan goes up |
Here is the practical takeaway. If all you want is a better rate at renewal, a switch is cheaper and simpler than a refinance. If you need cash or want to change the loan mid term, you are refinancing, and the numbers below matter.
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How much can you borrow when you refinance?
You can refinance up to 80 percent of your home’s appraised value, minus what you still owe. That 80 percent ceiling is the legal maximum for an uninsured mortgage in Canada, and you cannot buy mortgage default insurance on a refinance to push past it.
If you want a revolving line instead of a lump sum, a home equity line of credit is capped lower. The line portion is limited to 65 percent of the home’s value, although a combined mortgage and line can reach the same 80 percent ceiling. The Financial Consumer Agency of Canada explains these home equity limits in plain terms, see borrowing against home equity.
Does refinancing trigger Ontario land transfer tax?
No. Ontario land transfer tax applies when ownership of a property changes hands, for example when you buy a home. Refinancing does not transfer ownership, so there is no land transfer tax on a refinance. This is one of the most common worries clients raise, and the answer is good news. You are registering a new charge, not a transfer.
What you do pay are registration fees, which are much smaller, plus your other closing costs. Those come next.
Do you still have to pass the mortgage stress test to refinance?
Usually yes. When you refinance and increase your loan amount, your lender applies the federal mortgage stress test. You have to qualify at the higher of 5.25 percent or your contract rate plus 2 percent.
This is where a recent rule change trips people up. As of November 21, 2024, the federal regulator removed the stress test for a straight switch at renewal, where you move the same balance and amortization to a new lender, see the OSFI announcement. That exemption does not apply to a refinance. The moment you borrow more or extend the amortization, the stress test is back. So a homeowner who passed easily at renewal can still be told they qualify for less when they try to pull equity out.
The takeaway. If you are counting on a specific cash amount, ask your lender to confirm what you qualify for at the stress tested rate before you commit to spending it.
What does the refinance process look like with a lawyer?
Once your lender approves the refinance, the file moves to a real estate lawyer. Here is the path we follow on a typical Ontario refinance.
- We receive the mortgage instructions from your new lender and confirm the terms match what you agreed to.
- We search your title, run execution and writ searches against your name, and confirm there are no liens or judgments the new lender will refuse to advance behind.
- We request a payout statement from your current lender so we know the exact amount needed to discharge the old mortgage, including any penalty.
- We prepare the new charge and the supporting documents, then book a signing appointment, in person or by video where the lender allows it.
- You sign, provide identification, and confirm your home insurance lists the new lender.
- On the closing date the new lender advances funds. We pay out and discharge your old mortgage, register the new charge in Teraview, the province’s electronic land registration system, and send you any remaining cash.
Timeline. As a general guide most refinances close within a couple of weeks of the lawyer receiving instructions.
You can read more about how we act on real estate files on our Toronto real estate lawyer and Ottawa real estate lawyer pages.
What does refinancing cost in Ontario?
Refinancing has its own closing costs, separate from any penalty to break your term. Here is what to budget for.
| Cost | Who charges it | Typical amount | Notes |
|---|---|---|---|
| Legal fees | Your lawyer | Flat fee, confirm | Transparent flat fee at our firm |
| New charge registration | ServiceOntario | $85 per document | Government fee, current Nov 3, 2025 |
| Discharge of old mortgage | ServiceOntario | $85 per document | Billed separately from the new charge |
| Title insurance | Title insurer | Varies by value | Usually required by the lender |
| Appraisal | Appraiser or lender | Varies | Confirms value for the 80 percent limit |
| Lender discharge or admin fee | Current lender | Varies | Shown on your payout statement |
| Prepayment penalty | Current lender | Varies | See the next section |
The registration fees are set by the province and adjust slightly each year, see the current Ontario land registration fee schedule. The two registrations, the discharge of the old mortgage and the new charge, are billed separately, so plan for two of them.
How are mortgage prepayment penalties calculated?
If you break a closed mortgage before the term ends, your lender charges a prepayment penalty. For a variable rate mortgage the penalty is usually three months of interest. For a fixed rate mortgage it is usually the greater of three months of interest or the interest rate differential, often called the IRD, which estimates the interest the lender loses by you leaving early.
The IRD can be large, especially at the big banks, which calculate it using their posted rates rather than the discounted rate you actually pay. On a sizable balance with a few years left, a fixed rate penalty can run into the thousands.
There is a legal cap worth knowing. Under the federal Interest Act and the Ontario Mortgages Act, if your mortgage term is longer than five years and you are past the five year mark, and you are an individual rather than a corporation, the most you can be charged to prepay is three months of interest, see section 10 of the Interest Act. Corporate borrowers do not get this protection.
Three ways to keep the penalty down. Time your refinance close to your renewal date, when the penalty shrinks toward zero. Use your annual prepayment privilege first, often 10 to 20 percent of the balance, to lower the amount the penalty is calculated on. And always ask your lender for the penalty in writing before you decide.
Refinance, HELOC, second mortgage, or blend and extend, which fits you?
Refinancing is not the only way to use your home’s value or change your loan. The right choice depends on how much you need, whether rates have moved, and how long you have left in your term.
| Option | How it works | Maximum borrowing | Breaks current mortgage | Best when |
|---|---|---|---|---|
| Refinance first mortgage | Replace the whole loan | Up to 80 percent | Yes, may trigger a penalty | You want a lump sum and a better rate, or to consolidate debt |
| HELOC | Revolving line on the home | Up to 65 percent for the line | No | You want flexible access and to borrow only what you use |
| Second mortgage | Separate loan behind the first | Depends on your equity | No | You cannot break the first cheaply and need funds now |
| Blend and extend | Blend new borrowing at today’s rate, reset the term | Depends on lender | No, avoids the penalty | Rates are similar and you want to skip the penalty |
A quick framework. If you mostly want a lower rate and you are near renewal, wait and switch. If you need a defined amount of cash and rates favour you, refinance. If you want a cushion you may not fully use, a line of credit fits. If breaking your term is too expensive right now, a blend and extend or a second mortgage can bridge you until renewal.
What mistakes do homeowners make when refinancing?
A few patterns come up again and again in our office.
- Chasing a small rate drop. Refinancing for a quarter point of savings often does not cover the penalty and closing costs. Run the math on the break even point first.
- Forgetting the stress test returns. Clients who renewed easily assume a refinance is automatic, then learn they qualify for less once the loan goes up.
- Not getting the penalty in writing. The payout statement can be thousands more than expected. Ask for it before you commit.
- Letting a high rate second mortgage sit. Carrying a private second at double digit rates while the first sits at a low rate is expensive. Refinancing the two together usually saves money.
- Ignoring a writ or lien on title. An old judgment or unpaid debt registered against your name can stop the new lender from advancing. We look for these early so they can be cleared before closing.
A document checklist for your refinance
Having these ready speeds up the file.
- Government photo identifications for everyone on title.
- Your mortgage commitment or approval from the new lender.
- Your most recent mortgage statement.
- A recent property tax bill showing taxes are current.
- Proof of home insurance, with the new lender added once you have the details.
- A void cheque or banking details for the new payments.
- A condominium status certificate, if your home is a condo.
Frequently asked questions
Can I refinance before my mortgage term ends?
Yes. You can refinance at any point, but breaking a closed term early usually means a prepayment penalty. Whether it is worth it comes down to the math. Compare the penalty plus closing costs against the interest you would save or the value of the cash you are accessing. If you are within a few months of renewal, waiting often avoids the penalty entirely.
How much can I borrow when I refinance my home?
Up to 80 percent of your home’s appraised value, minus the balance you still owe. Your lender still has to confirm you can carry the larger payment under the stress test, so the amount you qualify for can be lower than the amount your equity allows.
Do I need a lawyer to refinance in Ontario?
Yes. In Ontario, discharging your old mortgage and registering the new charge on title must be done by a lawyer through the province’s electronic land registration system. Your lawyer also confirms your title is clear and that the lender’s conditions are met before any funds are advanced.
Will I pay land transfer tax when I refinance?
No. Land transfer tax applies when ownership changes, such as on a purchase. A refinance does not transfer ownership, so it does not attract land transfer tax. You do pay registration fees and your other closing costs, which are far smaller.
How long does a refinance take in Ontario?
In most cases a refinance closes within a couple of weeks of your lawyer receiving the lender’s instructions. The pace usually depends on how quickly your current lender sends the payout statement and how quickly the new lender’s conditions are satisfied.
Is it better to refinance or open a line of credit?
It depends on how you will use the money. A refinance gives you a lump sum at a mortgage rate and resets your loan, which suits a one time need like consolidating debt or funding a renovation. A home equity line of credit gives you a revolving balance you draw on as needed, usually at a higher variable rate, which suits ongoing or uncertain costs. Many homeowners use a combination of the two.
The information provided above is of a general nature and should not be considered legal advice. Every transaction or circumstance is unique, and obtaining specific legal advice is necessary to address your particular requirements. Therefore, if you have any legal questions, it is recommended that you consult with a lawyer.
