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Refinancing is replacing an existing mortgage with a new one, often before the term ends, to change the amount borrowed, access home equity, or alter the rate and terms. Unlike a switch, a refinance can increase the loan amount and normally requires requalifying at the minimum qualifying rate.
Refinancing replaces the existing mortgage with a new one, and unlike a switch, it can change the loan amount — pulling out equity, consolidating debt, or restructuring the mortgage before the term is up. That flexibility comes with more underwriting: increasing the loan amount generally means requalifying at the minimum qualifying rate.
Refinancing before the term ends usually means breaking the existing contract early, which typically triggers a prepayment penalty. Whether the refinance still makes sense depends on weighing that penalty against the benefit — a lower rate, cash for renovations, or paying off higher-interest debt.
Refinance transactions aren’t eligible for new mortgage default insurance, so they’re underwritten as conventional lending and evaluated against loan-to-value limits. A common alternative for accessing equity without fully refinancing is a HELOC.
Breaking the term costs money: refinancing before maturity usually triggers a prepayment penalty for breaking the existing contract early.
Requalification applies: increasing the loan amount generally means requalifying at the minimum qualifying rate — the greater of the contract rate plus 2 percentage points or 5.25% — under OSFI Guideline B-20.
Refinances aren’t insurable: refinance transactions are not eligible for new mortgage default insurance from CMHC, Sagen, or Canada Guaranty; they’re underwritten as conventional (uninsured) lending.
Who arranges it: mortgage agents (Ontario, FSRA), submortgage brokers (BC, BCFSA), mortgage associates (Alberta, RECA), and courtiers hypothécaires (Quebec, AMF) structure refinances and weigh penalty costs against benefits.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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