Refinancing Your Home in Canada: How It Works and When It Makes Sense

Refinancing is one of those ideas that crosses almost every homeowner's mind. When you buy a place, you want to get the most out of owning it, and refinancing is one of the tools that opens up. So what is it, and what are the good and bad sides?

I'm Moe Asgarian, a senior real estate broker in Toronto. I want to walk through refinancing and clear up some of the questions and doubts people bring to me about it. The mechanics are simpler than they sound, but the decision behind them deserves real thought.

What Refinancing Actually Means

The plain definition: you pay off the mortgage you have right now and take out a brand-new one. Usually the new loan is larger than the old one. That is the whole idea in a sentence. The reason people do it, and whether it is smart in your case, is where it gets more interesting.

A Simple Example With Real Numbers

Say you bought a home a few years ago for $1 million and borrowed $800,000. Over those years you paid down $200,000 of the principal, so today you owe $600,000. Meanwhile the home went up by $300,000 and is now worth $1.3 million. If you qualify, a bank can lend you up to 80% of the home's value. That means a new loan as large as $1,040,000. Replacing your $600,000 mortgage with that new, bigger loan is what we call refinancing.

Why People Refinance

People do it for different reasons. Some want better terms on the loan they already have. Others need cash. Maybe they bought the home with borrowed money and want to clear that debt, or they want to use the funds as a down payment on a second home. Over the past few years I have seen many parents tap this. They had a home that appreciated over the years, and by refinancing they put together the down payment for their kids, kids who had income but not enough saved for the deposit. This was especially common during the COVID years when rates were very low. Done right, refinancing can also free up money to invest and earn a better return than the interest you are paying. And sometimes it is not about money at all. Refinancing can be a way to remove one person's name from a mortgage after a separation or divorce.

When Refinancing Isn't the Right Move

Refinancing is not always the smart choice. With today's rates and terms, you have to run the numbers and check whether it is genuinely the best path or whether there is a better one. It is not simple either. You prepare documents again, sign paperwork, and the lender restarts the whole review of your credit score, income, and overall situation to decide if you qualify. On top of that, refinancing costs money. There are fees that can make the whole thing more expensive than it first looks.

Refinancing in the 2024 Market

You probably know this works best when rates are low. A few years ago, when rates were very low, a lot of my clients wanted to refinance. During COVID, around February 2021 if I remember right, the 5-year fixed rate was roughly 2.45%, and plenty of people jumped on it. So what about 2024? I have talked about this year's trends in detail before. It looks like a balanced market, with prices moving maybe plus or minus 5% from start to finish, and rates are not likely to swing much. In early 2024, mortgage rates are around 6%. With rates this high, if you are going to refinance, do it right: know your numbers, and understand your home and where its price is headed. Because refinancing has real costs, talk to a mortgage advisor or your financial advisor first. If you like, our team at Team Asgarian can connect you with trusted professionals who have worked with us for years.

Refinancing can be a powerful move or an expensive mistake, and the difference is in the details. If you are weighing it and want guidance in this market, fill out the form at the bottom of this page or book a free consultation. Stay well and take care.