A good time to refinance your mortgage depends on your goals and market conditions. Here are the most common situations when refinancing makes financial sense for homeowners in Ontario:
✅ 1. Interest Rates Have Dropped
If current mortgage rates are significantly lower than your existing rate, refinancing could reduce your monthly payments and save thousands in interest over time.
Rule of thumb: Consider refinancing if the new rate is 0.5%–1% lower than your current rate and you’re staying in the home for at least a few more years.
✅ 2. You Need to Access Equity (Cash-Out)
If your home value has increased and you’ve built equity, refinancing can give you a lump sum for:
- Renovations
- Business investment
- Large purchases
- Paying off high-interest debt
- Stopping a power of sale (if in arrears)
You can refinance up to 80% of your home’s appraised value.
✅ 3. You Want to Consolidate Debt
Refinancing can be smart if you’re carrying high-interest debt (credit cards, personal loans) and want to roll it into your mortgage at a lower interest rate.
This simplifies payments and frees up monthly cash flow.
✅ 4. Your Mortgage Term Is Ending
If your current mortgage is up for renewal, it’s an ideal time to refinance because:
- There’s no prepayment penalty
- You can shop around for better terms
- You can increase your loan amount if needed
✅ 5. You Want to Switch from Variable to Fixed (or Vice Versa)
You might refinance to change your mortgage type if:
- You want payment stability and fear rising rates (switch to fixed)
- You want lower payments in the short term (switch to variable)
✅ 6. Your Financial Situation Has Improved
If your credit score, income, or debt load has improved since you got your mortgage:
- You may now qualify with an A-lender or better rate
- You can reduce your risk profile and borrowing cost
⚠️ When It Might Not Be Worth It
- You’re close to the end of your current mortgage term and the penalty outweighs savings
- Your home value has dropped and you don’t have enough equity
- You can’t qualify for a better rate due to credit issues or low income
- You plan to sell the home soon, making the refinance costs unnecessary
Summary: Best Times to Refinance
| Situation | Refinancing Makes Sense? |
|---|---|
| Rates have dropped 0.5–1%+ | ✅ Yes |
| Need cash for renovations or debt | ✅ Yes |
| Mortgage term is ending | ✅ Yes |
| You’re in arrears and need to stop legal action | ✅ Yes |
| Selling in next 12 months | ❌ Usually no |
| Penalty to break mortgage is too high | ❌ Not ideal unless urgent |
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