Refinancing your mortgage can be a powerful financial tool when used at the right time and for the right reasons. Whether you’re hoping to lower your monthly payments, access home equity, or consolidate debt, understanding how refinancing works — and how to prepare for it — can make the process smoother and more rewarding.
Below are some key things every Ontario homeowner should know before starting the refinancing process.
Understand Why You’re Refinancing
Before applying, it’s important to have a clear goal in mind. Are you refinancing to get a lower interest rate? To switch from a variable to a fixed term? To access equity for renovations or other financial needs?
Each reason comes with different lender considerations, and your goals will determine which products make the most sense. Knowing this early helps your mortgage professional tailor the process and match you with the right lender from the start.
Prepare Your Financial Information
Just like when you applied for your first mortgage, lenders will want to see a full picture of your finances. You’ll typically need:
- Proof of income (recent pay stubs, T4s, or a letter of employment)
- Current mortgage statement
- Property tax bill and homeowner’s insurance
- Details about any other debts or assets
If you’re self-employed, be ready to show two years of tax returns or financial statements. Having this information organized and ready can speed up approval times significantly.
Know Your Home’s Current Value
Your home’s market value plays a major role in determining how much equity you can access. Most lenders will require an appraisal before approving a refinance. The more your property has appreciated, the more options you may have.
A mortgage professional can help you estimate your home’s current value before you commit to a full appraisal, so you have realistic expectations.
Watch for Prepayment Penalties
If you’re refinancing before your current mortgage term ends, be aware that your existing lender may charge a prepayment penalty. This fee is typically based on either three months’ interest or the interest rate differential (IRD), depending on your mortgage type and contract.
Before refinancing, it’s a good idea to ask your current lender for an exact penalty quote. Sometimes, the savings from a better rate still outweigh the penalty — but it’s important to compare carefully.
Understand the Costs Involved
Refinancing isn’t free. Beyond potential prepayment penalties, you might also face appraisal fees, legal fees, and lender setup costs. Many of these can be rolled into your new mortgage, but it’s important to know what you’re signing up for.
Some lenders offer “no-fee” refinance products, but the interest rate might be slightly higher to offset the waived costs. Always review the fine print and compare the full cost of borrowing, not just the advertised rate.
Compare Lenders — Not Just Rates
It’s tempting to focus only on the lowest interest rate, but the best mortgage isn’t always the cheapest one on paper. Lenders differ in how they calculate penalties, handle prepayments, and allow future refinancing.
Working with an independent broker gives you access to a wide range of lenders — not just the options from one bank — and helps you find the balance of rate, flexibility, and service that best fits your long-term goals.
Check Your Credit Before You Apply
Your credit score plays a major role in determining your eligibility and the rates you’ll qualify for. Checking your credit ahead of time gives you the chance to correct errors or pay down balances before you apply.
If your credit has improved since you got your original mortgage, you may qualify for a better deal than before. If it’s dropped, your broker can help you explore alternative lenders or strategies to strengthen your application.
Plan Ahead for a Smooth Process
A refinance can typically take between two and four weeks from application to completion, depending on the lender and how quickly documentation is provided. To avoid delays, respond promptly to requests for additional information and ensure all paperwork is complete.
If you’re refinancing to consolidate debt or access equity for a specific purpose, it’s best to start early. A proactive approach gives you time to evaluate your options and avoid last-minute stress.
How The Local Broker Can Help
At The Local Broker, we make refinancing simple, transparent, and tailored to your needs. We’ll walk you through your options, help you compare lenders, and ensure you understand every step of the process.
Whether you’re aiming to reduce your payments, shorten your term, or access your home equity, we’ll help you find a solution that aligns with your financial goals.
If you’re considering refinancing your mortgage in Ontario, connect with The Local Broker today to get personalized advice and see what’s possible.
