Refinancing is different from renewal
A renewal generally replaces the expiring term while the existing mortgage continues. Refinancing may replace the mortgage earlier, increase the amount borrowed, change the amortization or restructure other terms.
Why people consider refinancing
Common reasons may include changing the mortgage structure, consolidating certain debts, accessing home equity, funding a major expense or moving to a different lender. Whether any option is appropriate depends on the individual situation and lender requirements.
Costs and conditions to review
- Prepayment charges for ending the existing term early
- Legal, appraisal, discharge, registration or administration fees
- The new interest rate and term
- The new payment and amortization period
- The total amount borrowed and total interest cost
- Conditions required for approval
Debt consolidation is not debt elimination
Moving higher-interest debt into a mortgage can reduce the immediate rate or payment, but it also converts that debt into borrowing secured by the home. Extending repayment over many years may increase total interest even when the regular payment is lower.
Questions worth asking
- What is the total cost of ending the existing mortgage?
- How much will be borrowed after every fee or financed cost?
- Will the amortization become longer?
- How do the new payment and total interest compare?
- What risks arise if the home is sold or the mortgage is changed again?
This page provides general education only. Review the Financial Consumer Agency of Canada for current federal consumer information. A lender or licensed mortgage professional must assess refinancing options, suitability and approval.