When Is the Best Time to Refinance Your Mortgage in Canada? (2025 Guide)

Are you considering a mortgage refinance? If rates have decreased, it might be a wise move to free up some cash or make your payments a bit easier to handle. However, there is no one-size-fits-all choice. Your financial status, plans, and timing are all important. We'll explain in this guide when refinancing makes sense, when it doesn't, and how to take full advantage of the opportunity.

What Is Mortgage Refinancing?

In essence, refinancing involves exchanging your previous mortgage for a new one, frequently with better terms or a lower interest rate. Refinances are made to:

• Reduce monthly payments and interest rates
• Use home equity for major purchases or renovations
• Modify their mortgage's term (for example, from 30 to 15 years)
• Convert variable rates to fixed rates
• Combine other debts at a reduced interest rate

Learn more from the Financial Consumer Agency of Canada (FCAC)

When Should You Think About Refinancing?

If interest rates have decreased by 1% to 2% since you obtained your mortgage and your credit score has increased, allowing you to access better terms, it might be the right decision.

You have at least 20% equity in your home; you want the stability of a fixed-rate mortgage; you need money for major expenses like remodeling or schooling; you wish to combine high-interest debt; you're dissatisfied with your current lender and would prefer better service or cheaper fees;

Expenses to Be Aware of

Although it's not free, refinancing can save you money, so you should make sure the savings outweigh the costs. The following expenses might be required of you:

• Home appraisal and legal fees
• Discharge and registration fees
• Prepayment penalties (if you're breaking your current mortgage early)
• Lender administrative fees

Making sure your long-term savings exceed your initial outlay is crucial.

Signs You’re Ready to Refinance

• Interest rates have dropped: Over time, even a slight decrease can save you thousands.
• You may be eligible for a reduced rate because your credit score is higher.
• You've Increased Your Equity: You may be able to get money for debt consolidation or improvements with a cash-out refinance.
• Locking into a fixed rate can provide peace of mind if you want predictable payments.
• You'd like to pay off your house sooner: You can lower your overall interest payment by moving to a shorter term.

When It Might Not Be Worth It

• If you intend to relocate within the next year or two
• If your current equity is low and the fees exceed the money you would save by refinancing

FAQs About Mortgage Refinancing in Canada (2025)

Q: What’s the best time to refinance my mortgage?

A: A refinance could save you money if your credit has improved or if interest rates are lower than what you're paying now.

Q: How much equity do I need to refinance?

A: A minimum of 20% equity in your home is required by the majority of lenders.

Q: Does refinancing cost money?

A: In agreement. Legal, appraisal, and lender fees are to be expected; in some cases, there may even be a penalty for terminating your existing mortgage early.

Q: Will refinancing hurt my credit score?

A: Your credit score may temporarily drop as a result of the credit check, but it can eventually rise if you make your new loan payments on time.

Q: Can I refinance if my credit isn't great?

A: You might receive a higher interest rate, but it is feasible. Better offers may result from raising your credit score first.

Q: Should I refinance if I’m planning to move soon?

A: Most likely not. It's not worth it if you won't stay in the house long enough to recoup the closing costs.

Final Thoughts

Refinancing isn't a one-size-fits-all option, but it may help you save money, increase the value of your house, or pay off your mortgage more quickly. What are my objectives, you ask? Will I be moving soon? Does this actually fit my current financial circumstances? And it's always worthwhile to consult a mortgage expert if you're not sure.

Do you need assistance comparing refinance rates? Use our free refinance calculator and explore your options by going to rateswise.com

About the Author

The Rateswise Editorial Team, a team of mortgage experts and financial writers who are committed to assisting Canadians in making more informed and secure home financing choices, wrote this piece.

Disclaimer: This information is provided solely for informational purposes. For individualized guidance, please speak with a certified mortgage specialist.