Remortgaging in Canada: How to Utilize Your Home Equity
“If you’ve been living in your home for a few years, chances are you’ve built up some equity — and you might not even realize just how much it’s worth. Remortgaging could be your ticket to unlocking that value without selling a thing.”
What Is a Remortgage in Canada?
A remortgage is a refinance, paying off your current mortgage and obtaining a new one, either with your current lender or a different one. In Canada, it is typically referred to as a refinance, with the term “remortgage” less commonly used. Remortgaging can be done at any point during your mortgage term. However, you must pay prepayment penalties if you refinance at any point that isn’t at the end of your term.
How Does Mortgage Refinancing Work?
Remortgaging involves breaking your current mortgage and replacing it with a new one. Depending on your needs and financial situation, you may remortgage for a lower rate, increase the amortization or loan amount, or access your home equity. When you remortgage, your current or new lender will pay off the existing mortgage and replace it with another one or register a new one against your property.
If you break your mortgage before the end of the term, you will likely pay prepayment penalties. The amount will depend on your mortgage type (fixed or variable), the time remaining on the term, prevailing interest rates, outstanding balance, and your lender’s prepayment calculation policies.
Benefits of Remortgaging
1. Lower Your Interest Rate
If mortgage rates have dropped since you locked in your current rate, you may qualify for a better rate, reducing your monthly payment and total interest cost.
2. Access Your Home Equity
A remortgage lets you borrow up to 80% of your home’s appraised value minus your current mortgage balance.
3. Consolidate Debt
Remortgaging can simplify your finances by rolling high-interest debt into your mortgage, often at a much lower interest rate.
4. Change Your Amortization
A remortgage to increase the amortization can lower your mortgage payments and free up cash flow. Alternatively, you can increase your payments within existing terms to reduce amortization without refinancing.
Costs of Remortgaging in Canada
Typical costs include:
– Prepayment penalties (if breaking your mortgage early)
– Appraisal fees
– Legal fees
– Discharge fees
– Title insurance or registration fees
Alternatives to Remortgaging
HELOC (Home Equity Line of Credit): A flexible revolving credit backed by your home.
Second Mortgage: Allows you to borrow on existing equity but at higher interest rates.
Blended Mortgages:
– Blend and Extend: Combine current and lower rate for a longer term.
– Blend to Term: Get a lower blended rate for your remaining term.
– Blend and Increase: Borrow more without a full refinance.
Frequently Asked Questions
Can I remortgage before my mortgage term ends?
Yes, but prepayment penalties usually apply.
How much equity do I need to remortgage?
You need at least 20% equity in your property.
What’s the difference between remortgaging and a HELOC?
Remortgaging replaces your existing mortgage. A HELOC adds a line of credit secured against your home.
Final Thoughts
Remortgaging can offer substantial benefits, from lowering your rate to accessing equity. However, the key to making it work in your favour is understanding the costs involved, timing it right, and choosing the best mortgage strategy for your goals.
🏠 Remortgage vs. HELOC vs. Second Mortgage
Not sure which home equity option fits your needs? Here’s a side-by-side comparison of the three most common ways Canadians tap into their home equity.
| Feature | Remortgage | HELOC | Second Mortgage |
|---|---|---|---|
| 🔁 Replaces Existing Mortgage? | ✅ Yes | ❌ No | ❌ No |
| 💰 Lump Sum Access | ✅ Full amount upfront | ❌ Revolving credit | ✅ Full amount upfront |
| 📉 Interest Rate | Low (A-lender rates) | Variable (Prime +) | Higher (6%–12%) |
| 📑 Qualification | Full income verification | Strong credit required | Flexible (can use equity) |
| 🕒 Term Length | Fixed terms (1–5 yrs) | Revolving | Short-term (6 months–2 yrs) |
| ⚠️ Risk Level | Low | Medium (if rates rise) | High (short term, high fees) |
💡 Tip: Each option serves a different purpose — remortgage for large renovations, HELOC for flexible use, and second mortgage for urgent cash when credit is tight.
Timeline of the Mortgage Refinancing Process
Thinking about refinancing your mortgage in Canada? Here’s a step-by-step look at the process — from first inquiry to funding — so you know exactly what to expect.
- Day 1–2: Initial Inquiry – Contact a mortgage broker or lender to explore options.
- Day 3–5: Document Collection – Submit ID, income proof, mortgage details, credit report, and property documents.
- Day 5–7: Application Submission & Pre-Approval – Lender reviews application and runs preliminary approval check.
- Day 7–10: Appraisal (if required) – A property valuation is done to confirm current market value.
- Day 11–13: Final Approval – Lender issues commitment letter and sets closing conditions.
- Day 14–17: Legal Process – Meet with lawyer or notary to review and sign refinancing documents.
- Day 18–20: Funding – New mortgage funds are released; old loan is paid off; leftover equity (if any) is deposited.
Tip: The full refinancing process usually takes about 2–3 weeks, but may be faster if your documents are ready and your credit is strong.
Ready to lower your rate, consolidate debt, or access your home equity?
Connect with our mortgage professionals today and explore your remortgage options.
Clara Desai
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