Refinance Mortgage Canada: What You Can Borrow And What It Costs

To refinance a mortgage in Canada you can borrow up to 80% of your home's appraised value at a federally regulated lender, you must pass the stress test at the higher of your contract rate plus 2 points or 5.25%, and breaking a term early usually costs the greater of three months' interest or the interest rate differential. As of October 29, 2026, prime sits at 4.70% after the Bank of Canada's October 28 hike, and borrowers on the rate board reported three-year fixed offers from 4.14% to 4.89% in late October.

How Much You Can Refinance In Canada

The federal ceiling is simple: at a federally regulated lender, a refinance can take your total mortgage to at most 80% of your home's value. The loan is uninsured, so there is no CMHC premium on a straight refinance, but the lender orders an appraisal and you qualify on the new, larger balance.

What that means in practice depends entirely on local prices. With the Greater Toronto average selling price at $1,006,409 in September 2026 (down 5.1% year over year, per TRREB), an owner there with a $600,000 balance has a different refinancing ceiling than an owner in Calgary, where the CREB residential benchmark was $566,700.

Price declines matter here. Calgary's benchmark was down about 1% year over year in September, which tightens the room above an existing balance rather than widening it. Before you commit to an appraisal, ask a licensed mortgage broker to price your file at two loan amounts: the full 80% figure and a smaller number that keeps your payment comfortable, so you can compare the actual math side by side. You can request cheaper rates and ask exactly that.

Refinance Calculator: Your Equity At 80%

The fastest way to see your own numbers is to run your home value and current balance through the equity tool below. It applies the 80% cap and shows the maximum new mortgage and the cash available, plus the payment at rates currently on the board.

Here is a worked example on top of it. Suppose a Toronto owner has a home appraised at $750,000 and a balance of $400,000 with 25 years left on the amortization. Eighty percent of $750,000 is $600,000, so the maximum new mortgage is $600,000 and the owner can pull out $200,000 in equity.

The spread between the best and worst offer on this file, 4.54% to 4.89%, is 0.35 points, and that swing works out to about $118 a month. That gap is why a refinance, more than a renewal, rewards shopping. The definition of a good rate shifts with the market, but the spread between the best and worst offer on the same file rarely does.

Renewal Or Refinance

A renewal and a refinance are different transactions with different costs, and confusing them is the most common mistake borrowers make.

• Renewal: the term ends, the balance stays the same, and you sign a new rate. Since November 21, 2024, OSFI rules mean a straight uninsured switch to another federally regulated lender, same amount and no longer amortization, has no mortgage qualifying rate stress test. Insured switches were already exempt.
• Refinance: the loan amount grows, the amortization can change, and the transaction is treated as new lending. The stress test applies, and the mortgage must stay at or under 80% loan to value.

If you only want a better rate on the same balance, a switch at renewal is cheaper and simpler. A refinance is the right tool when you need money out for debt consolidation, renovations or a purchase, or when you want to restructure the amortization. The renewal-vs-refinance question usually answers itself once you know whether you need cash. The renewal rates page covers the switch side in detail.

Refinancing Before The Term Is Up

Refinancing mid-term means breaking the contract, and that triggers a prepayment penalty. Under the FCAC rules, on a fixed-rate mortgage the penalty is usually the greater of three months' interest or the interest rate differential; on a variable-rate mortgage it is usually three months' interest. For scale, FCAC's own example puts three months' interest at $3,000 on a $200,000 balance at 6%.

The IRD is where refinancers get hurt. Big banks often calculate it against their posted rate for the remaining term minus your original discount, which tends to produce larger penalties than the discounted-rate methods used by many monolines and credit unions. Run your own numbers through the penalty calculator before you assume a refinance saves money, because a large IRD can eat a rate saving for years.

Two escape hatches exist. Many lenders let you lock a rate roughly 120 days before the term ends, and it varies by lender. And under section 10 of the Interest Act, on a term longer than five years you can repay after five years with three months' interest.

The Stress Test On A Refinance

Every refinance at a federally regulated lender must qualify at the higher of the contract rate plus 2 percentage points or 5.25%. With the best three-year fixed offers on the board sitting near 4.34% to 4.59%, contract rate plus 2 points lands at roughly 6.34% to 6.59%, above the 5.25% floor, so the contract-rate side governs almost every file today.

Two cautions on the debt ratios. CMHC's limits of 39% GDS and 44% TDS apply to insured mortgages, which a refinance is not. Uninsured limits are each lender's own and are not published, so one lender can decline a file another approves. A broker who knows which lenders underwrite to which internal cutoffs is genuinely useful here. The stress test guide walks through the math.

Rates Borrowers Reported This Week

These are rates posted to r/MortgagesCanada in late October 2026, around the Bank of Canada's October 28 hike. Treat them as reported data points, not quotes.

Variable rows were mostly quoted against the old 4.45% prime, so a prime minus 1.10 quote reported at 3.35% on October 28 works out to about 3.60% now if the discount holds. On October 27, RBC quoted 3.55% and Scotiabank 3.6% on five-year variables for uninsured purchases with 25% down, also at the old prime, and TD had a 3.55% five-year variable posted back on October 9. For the mechanics of what prime at 4.70% does to a variable payment, see the prime rate page.

Refinance Or HELOC

A home equity line of credit is the main alternative to a refinance. The rules differ: a HELOC's revolving portion can be at most 65% of the home's value, and a HELOC combined with an amortizing mortgage is capped at 80%. A standalone HELOC generally needs more than 35% equity, and a combined product more than 20%.

The trade-off is structure versus cost. A refinance gives you a fixed amount at a fixed or variable rate with a set payment, blended into one amortizing mortgage. A HELOC is variable, priced off the lender's prime with a premium, often interest-only minimums, and you pay interest only on what you draw, but the rate moves every time prime does, as it just did on October 29. For a one-time large need, a refinance usually wins on rate. For episodic borrowing, a HELOC wins on flexibility. Current HELOC pricing is on the HELOC rates page.

One more timing note: the Bank of Canada said a further increase may be needed and it will proceed carefully, and BMO expects another 25 basis point hike in January 2027 while CIBC sees one more but not above 2.75%. Those are attributed forecasts, not fact, but if you are refinancing into a variable, the lock-in question deserves a look at your broker's numbers.

Before you sign anything, request cheaper rates and ask a licensed mortgage broker to price your refinance two ways: as a full 80% refinance and as a switch plus HELOC, with the penalty on your current term calculated both ways. That single comparison is what most borrowers never get from their incumbent bank.

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