Today’s Mortgage Refinance Rates in Ontario

TL;DR: The rates you see advertised are not always the rate you get for a mortgage refinance.

• Refinancing rates are more complex than rates for buying a home.
• The actual rate you get depends heavily on your home’s equity, location, your credit score and debt to income ratio.
• Talk to a dedicated mortgage agent to navigate these factors and secure the best fit for your financial goals.

What Are Actual Mortgage Refinance Rates Right Now?

You have likely seen some great mortgage rates advertised. But if you are looking to do a mortgage refinance in Ontario right now, you might notice the rates you’re quoted are a little higher than expected. Why is this?

The simple answer is that refinancing is different from getting a mortgage to buy a home. When you refinance, you replace your existing mortgage entirely.

The real factors driving your mortgage refinance rate boil down to five things:

1. How much equity you have in your home?
2. Once you refinance, there is no longer any mortgage default insurance protecting lenders for your mortgage.
3. Length of your amortization.
4. Your credit history and debt to income ratios.
5. Your property’s location.

If you’re still deciding if this move is right for you, check out our guide on whether refinancing your mortgage in Ontario is a good idea to get started.

Factor 1: The ‘80% LTV Rule’ and Why Less is More for the Best Rates

One of the biggest factors in determining your refinancing rate is the amount of equity in your home. In the mortgage industry this is called your Loan-to-Value (LTV) ratio. It’s the amount of your mortgage compared to the appraised value of your home.

For example, if your home is worth $1,000,000 and your mortgage is $500,000, your LTV is 50%.

When you refinance your mortgage, Canadian rules set a maximum LTV of 80%. This means you can borrow up to 80% of your home’s value.

The Best Rates are for the Lowest Risk

While you can refinance up to the 80% limit, lenders will often charge you a higher interest rate the closer you get to that ceiling. Why? Because lender is taking more risk.

To get the most competitive refinancing rates, you typically want your LTV to be 65% or lower.

Understanding this loan-to-value distinction is crucial when planning your refinance. For a more detailed look at the process, be sure to read our complete homeowner’s guide to mortgage refinance in Ontario.

Factor 2: No Mortgage Default Insurance When You Refinance

The second major reason your mortgage refinance rate may be higher is the complete absence of default insurance.

When you first bought your home with a down payment of less than 20%, your mortgage had default insurance (from CMHC, Sagen, or Canada Guaranty). This insurance protects the lender, not you, if you default on your payments. Because the lender is protected, they can offer you a much lower interest rate.

A mortgage refinance, however, is considered an “uninsured” mortgage.

Because there is no insurance to protect the bank in case of a default, the bank takes on more risk. How does the bank make up for this higher risk? They charge a higher interest rate.

This is a non-negotiable part of the Canadian mortgage landscape. It is not about you specifically; it is a fundamental difference between an insured mortgage and an uninsured mortgage.

Factor 3: The Amortization Trade-Off—Monthly Savings vs. Total Interest

When you refinance, you have the option to extend your amortization period (the total time it takes to pay off the loan).

For example, you could take your existing 15-year remaining mortgage and extend it back to 25 or even 30 years.

1. The Benefit (Monthly Savings): By stretching your payments over a longer period, your monthly payment drops significantly. This can give you much-needed cash flow every month.
2. The Cost (Total Interest): Extending your amortization period increases the total amount of interest you will pay over the life of the loan. While your monthly bill is lower, the overall cost of borrowing is higher.

Lenders also view a longer amortization as riskier. When you combine a high LTV with a long amortization, you see a compounding effect that pushes your interest rate up. To figure out the difference in payments, use our mortgage calculator to run the numbers on different amortizations.

Factor 4: Your Credit Score and Debt Ratios (GDS/TDS)

When you apply for a mortgage refinance, the lender needs a full picture of your personal financial health to understand how much of a risk they’re taking on you and how to determine your interest rate.

The Power of Your Credit Score

Your credit score is the lender’s report card on how you manage debt.

• 720 credit score or higher: You get the best rates.
• 600-680 credit score: You may not get the best interest rate.
• 599 credit score and lower: You have to refinance with a B lender with much higher rates and fees.

Why Your Debt Ratios (GDS/TDS) Matter

Lenders look at your income compared to all your debts. This is measured by the Gross Debt Service (GDS) and Total Debt Service (TDS) ratios.

• GDS measures your housing costs (mortgage payment, property taxes, heat) against your total income.
• TDS measures all your debt payments (housing, car loans, credit card minimums) against your total income.

If these ratios are too high, the lender will worry that the new, larger mortgage payment will push you past your financial breaking point. Even if you have a great credit score, high debt ratios can lead to a much higher refinance rate or, in some cases, outright denial, because the lender sees you as to risky. As your agent, I analyze these ratios upfront to help you position yourself for the best possible rate before we even submit an application.

Factor 5: Property Location and Type Can Swing Your Refinance Rate

Your home is the “security” for the mortgage refinance, so the lender worries about their ability to re-sell it (a.k.a. “marketability”) should you default on your mortgage. This marketability is primarily determined by your home’s location and condition.

Location, Location, Location

The financial institutions and lenders we work with consider the local real estate market when setting rates.

• Urban Centres (Low Risk): Properties in places with deep, stable housing markets are often seen as lower risk because they are easy to sell quickly if a default occurs.
• Smaller Towns or Rural Areas (Higher Risk): A property in a less populated, more remote area may be viewed as higher risk because it could take longer to sell. This is why the rate you find for a mortgage refinance in area’s surrounding North Bay, Ontario could be slightly different than what is offered in the middle of North Bay.
• Unique Property Types: If your home is not a standard detached or semi-detached property (e.g., a log home, a rural property with a lot of land, or a unique condo unit), the lender may have fewer comparable sales, increasing their perceived risk and potentially leading to a higher rate.

By understanding how your specific property fits into the market, we can choose the lender who fits your entire financial situation and physical location best, helping you secure a better mortgage refinance rate.

Why a Dedicated Mortgage Agent is Your Best Asset

Navigating all these rules, ratios, and risk factors is our job as your dedication mortgage agents.

We do not just find you the lowest advertised rate. We look at your full financial situation, your goals (ie. better cash flow vs. saving on interest), your home’s equity, and all these other important factors to approach the lenders that fit you best. We act as your advocate.

Book a call now. I’ll help you understand your LTV, calculate your debt ratios, and ensure you are positioned to get the best possible terms for your situation.