Mortgage Refinance FAQ Hub

Refinancing replaces your existing mortgage with a new one, letting you access equity, change your rate type, or adjust your amortization. In BC, you can typically borrow up to 80% of your home's appraised value minus the outstanding balance, subject to the stress test at the greater of the contract rate plus 2% or the benchmark rate. We walk Richmond and Metro Vancouver homeowners through the math, the paperwork, and the timing so the move makes sense for your situation.

Why Homeowners Refinance

The most common driver is consolidating higher-interest debt such as credit cards, lines of credit, or car loans into a single mortgage payment at a lower rate. This can free up monthly cash flow, but it also converts unsecured debt into debt secured against your home, so the discipline to avoid re-accumulating balances matters.

Others refinance to fund renovations, help adult children with a down payment, or invest in a rental property. Because the loan is secured by real estate, lenders generally offer better rates than unsecured alternatives, but you must qualify under the same stress-test rules as a purchase.

Equity Limits and Loan-to-Value Rules

Canadian regulations cap refinances at 80% loan-to-value (LTV). If your home is worth $1,000,000 and you owe $550,000, the maximum new mortgage is $800,000, leaving $250,000 of accessible equity before closing costs. A current appraisal — ordered by the lender — confirms the value.

If you need more than 80% LTV, the options narrow to a second mortgage or a private lender, which carry higher rates and fees. We model both scenarios side by side so you can see the total cost of borrowing over the term you're considering.

Fixed vs Variable When You Refinance

Choosing a rate type at refinance is a fresh decision, not a continuation of your previous term. Fixed rates give payment certainty for the full term; variable rates typically start lower but move with the lender's prime rate. In a rising-rate environment, the spread between fixed and variable narrows, and the risk of payment shock increases.

We stress-test both options at the qualifying rate so you see the maximum payment you'd need to support. If you prefer flexibility, some lenders allow conversion from variable to fixed mid-term without penalty — ask us which ones.

Penalties: Breaking Your Current Term

If you refinance before your term matures, the lender charges a prepayment penalty. On a fixed-rate mortgage, this is usually the greater of three months' interest or the interest-rate differential (IRD), which can be substantial when posted rates have dropped since you signed. Variable-rate penalties are typically three months' interest only.

We calculate the exact penalty using your lender's formula before you commit. Sometimes waiting until renewal — or porting your mortgage to a new property — saves thousands. If the math supports breaking early, we structure the new mortgage to offset the cost over your planned hold period.

Documentation and the Stress Test

Refinancing requires a full application: income verification (T4s, notice of assessments, or two years of financial statements if self-employed), credit bureau, property tax statement, and the appraisal. The stress test applies at the higher of your contract rate plus 2% or the Bank of Canada benchmark, even if you're staying with the same lender.

Self-employed borrowers often qualify using a two-year average of net income plus eligible add-backs. Newcomers with permanent-resident status can access standard programs at major lenders with international credit-bureau support. We package the file to highlight stability and reduce back-and-forth with underwriting.

Timeline and Costs to Expect

A straightforward refinance takes 10–15 business days from signed application to funding. The appraisal (typically $300–$500) and legal fees ($800–$1,500) are the main out-of-pocket costs; some lenders offer a cash-back credit that covers part or all of the legal fee. Title insurance is usually required in place of a survey.

If you're pulling equity for a time-sensitive purpose — a purchase deposit, tax payment, or renovation draw — we coordinate the lender's funding schedule with your lawyer so the money lands when you need it. Delays most often come from missing documents or appraisal scheduling, so we front-load the checklist.

Can I refinance if my credit score has dropped since my original mortgage?

Yes, but the rate and lender options change. Prime lenders typically want a beacon score above 680 for the best pricing; between 600–680 you may face a rate premium or need a B-lender. Below 600 usually means private financing at higher rates. We review your bureau early and, if needed, suggest quick wins — paying down revolving balances, correcting reporting errors — before the application.

Is the appraisal fee refundable if the deal doesn't close?

Generally no. The appraiser is paid for the inspection and report regardless of whether the mortgage funds. Some lenders waive the appraisal fee on a refinance if you use their preferred appraiser and the loan closes; we confirm the policy in writing before you order it.

Can I add renovation costs into the refinance amount?

Yes, through a completion mortgage or a renovation draw schedule. The lender advances funds in stages as work progresses, verified by inspection. The total loan still cannot exceed 80% of the as-completed value, and you must qualify on the full amount at the stress-test rate. We help you structure the draws to match your contractor's schedule.

What happens to my existing HELOC when I refinance the first mortgage?

The HELOC must be either paid out and closed, or subordinated (kept in second position) with the new first mortgage lender's approval. Not all lenders allow subordination, and the combined loan-to-value still cannot exceed 80%. If the HELOC balance is small, rolling it into the new first mortgage often simplifies the structure and lowers the blended rate.

Ready to see the numbers for your situation? Call 778-991-3289 and speak with Jensen Tam today. We'll run the equity calculation, penalty estimate, and stress-test qualification in one conversation — no obligation. You can also start with our mortgage calculator or book a time via our contact page.