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Mortgage Refinancing

What You Need to Know About Refinancing Your Mortgage

More homeowners are considering refinancing their mortgage.  What is mortgage refinancing exactly?  It’s the act of paying out your current mortgage and replacing it with a new one, with different terms and a new rate.  

There are many reasons you may want to refinance your mortgage, but here are the top two reasons for most people. 


To Get a Lower Interest Rate 

Rates are historically low.  Many homeowners are refinancing to take advantage of these low rates and lose their high-interest rates.  

To understand why getting a lower interest rate is so beneficial, consider the savings.  In November 2018 a homebuyer secured a 5-year fixed rate at the average rate of 3.50%.  Today, 5-year variable rates are around 1.5% and sometimes even lower.  

The savings that come with refinancing at a lower rate can be significant.  The difference between a 3.5% rate and a 1.5% rate is $75 a month, or more than $7000 over five years for every $100,000 of the mortgage.  

However, fixed rates come with a prepayment penalty.  Which in some cases can be high if borrowers break the mortgage early. 

Ending the fixed term early can still work in your favour, even if there is a penalty.  Over the long term, you may still save depending on the new rate and the penalty amount.  I can help you determine how much you would save over time and if refinancing is right for you. 

To Access Home Equity  

Another reason refinancing has become more common in recent years is due to the pandemic.  A recent survey showed that 10.2% of respondents said that they plan to refinance “due to COVID-19” now that they’re back to work.  

In 2020, many Canadian lenders offered mortgage payment deferrals for up to six months to borrowers financially impacted by the pandemic.  Now, most of those deferrals have ended or will be ending soon.  

Other Reasons to Refinance 

There are many more reasons why homeowners refinance including: 

  • To lower their monthly mortgage payments.  Borrowers may be able to lower their monthly payments by securing a lower interest rate or extending the loan term, spreading their payments out over a longer period.  For homeowners with tight budgets looking for more financial breathing room, this might make their payments easier to manage.  
  • To consolidate debt.  Homeowners with high-interest debt can refinance to roll their debt into their mortgage at a much lower rate.  Financially, this is smart for anyone with large credit card debt where interest rates can be 20% or more.  
  • Home improvements. With thousands of employees working from home because of the pandemic, Canada is experiencing a home renovation boom.  Homeowners are adjusting their living spaces to be more conducive to work.  By refinancing, borrowers can take advantage of low-interest rates and access funds to pay for renovations, rather than using credit cards or a personal line of credit with higher interest rates.  


Regardless of your reason for mortgage refinancing, there are potential hurdles to be aware of.  Penalties and qualification criteria can determine whether you are a good candidate for refinancing.  Contact me for unbiased advice on if this is a smart choice for you.  

Duane Springsteel     
Duane Springsteel

Duane Springsteel - Mortgage Broker Professional