Mortgage Refinance Rates

What Are Mortgage Refinance Rates?

It is the interest rates that lenders provide when you refinance your current mortgage. This describes how much interest you’ll pay over your new loan. You can modify your loan terms, access home equity, or reduce your monthly payments by refinancing.

Always check refinance rates from various lenders to save money and get better terms for the next mortgage period.

Mortgage refinance rate update 2025

Variable mortgage rates

After Canadian lenders adapted to the Bank of Canada's most recent overnight rate decision, variable mortgage rates saw another 25 basis point decline on January 30. The lowest variable refinance rates in Canada dropped to about 3%.

Homeowners thinking about a variable rate for a refinance could anticipate rate reductions of comparable size for the remainder of the year, as the Bank was quite drastic in its rate reductions to the end of 2024. 

Fixed mortgage rates

Fixed mortgage rates have also declined. As of March 5, 2025, some brokerages offer three-year fixed mortgage rates below 3.9%, while five-year fixed rates are slightly less than 4%.

Falling government bond yields, which provide lenders the ability to reduce fixed rates, have an impact on this drop.

How to get the best Mortgage refinance rates?

The process is similar as you apply for a new home loan. The lender will re-examine your finances in order to approve you.

Your lender will verify certain things before offering you the best mortgage rate, here’s the list:

Debt service ratios: It depends on GDS and TDS. Lenders will verify how much your income goes towards purchasing before approving a mortgage. In Canada, GDS should be less than 39%, and TDS shouldn’t be more than 44% of your income. And if your ratios are below these limits, you’ll easily get approved. 

Credit score: The highest possible score you can get. Borrowers with a credit score of 700 or above will be qualified. 

Missed mortgage payments: As a homeowner, you need to maintain your financial stability and credit score by making your payments on time.

Late mortgage payments are a warning sign as they can lower your credit score or result in foreclosure.

If you have any debt or a bad credit score, your lender will no longer allow you to refinance. That doesn't mean you have no options; some lenders will approve you because they specialize in bad credit mortgages and will help you refinance.

Other mortgage refinance costs you must consider

The interest rate you are offered is not only one aspect of mortgages; there are other factors to consider as well. This is particularly true with refinancing, where additional expenses may include:

Prepayment Penalties: You must end your mortgage agreement, pay off your loan, and pay a major penalty before the end of your mortgage term if you want to refinance. The amount you pay will depend on the interest rate. 

Home appraisal: Before determining how much you can borrow against your house, your lender will need a professional appraisal to estimate your home value.

Legal fees: Just like with your first mortgage, the transaction will need to be supported by a real estate lawyer. 

Mortgage discharge fees: You may still be required to pay off your mortgage even if you refinance with a different lender.

It will always sound appealing to lock in at a lower rate, but make sure you're making the best long-term choice for your family, you must balance the advantages against the overall cost.

What causes the increased rates for mortgage refinances?

The fact that mortgage refinance rates are generally higher than buy mortgage rates is explained by a number of different ideas.

1. When lenders give borrowers more credit over a longer period, they are taking on more risk. For example, refinancing your mortgage, borrowing against your home equity, and choosing a longer amortization period increases the amount of time you may be unable to make your mortgage payments.

2. The fact that refinances may cause lenders to make less money. Let's say you agree to a five-year fixed-rate mortgage at 5%, but you can refinance at 3% after two years. As a result, you will save money for three years, but your lender will make less money for three years. By raising the rate on your refinance, you can reduce these losses. High prepayment penalties are also beneficial.)

Final Thoughts

In Canada, mortgage refinance rates fluctuate, so it's critical to evaluate offers, and all costs, and make sure refinancing fits with your financial goals. To make the best choice if you're unsure talk to an expert.

Disclaimer: This content is based on current facts and intended purely for informational purposes. Always ask your lender about current details.