Mortgage Refinance Costs in Ontario

Start with the mortgage payout cost

If the current term has not matured, the lender may charge a prepayment penalty. The calculation can be based on a number of months' interest, an interest rate differential or another contract method. Request a written payout statement that shows the balance, penalty, discharge charges and the date through which the quote applies.

List the setup and closing costs

• Property appraisal when required
• Legal fees and disbursements
• Title insurance and registration costs
• Existing-lender discharge or administrative fee
• New-lender administration fee when applicable
• Broker or lender fees for certain alternative or private mortgages
• Interest adjustments and any property-tax or secured-debt payouts

Run a break-even calculation

Add the penalty and all transaction costs, then compare them with the expected monthly or interest savings. Dividing the total cost by the estimated monthly saving gives a simple break-even period. If you may sell or change the mortgage before reaching that point, the refinance needs another strong benefit to make sense.

Do not confuse lower payments with lower cost

Extending the amortization can reduce the monthly payment while increasing the time and total interest required to repay the debt. That may still be an intentional cash-flow decision, but the comparison should show both the immediate payment relief and the longer-term cost. Include a plan for extra payments when affordable.

Decide whether to refinance now or at renewal

Waiting until maturity may avoid an early payout penalty, while refinancing now may solve an urgent cash-flow, renovation or debt problem. Compare the cost of waiting with the cost of acting. If higher-cost short-term financing is being considered, include a realistic exit at sale, renewal or qualification with a lower-cost lender.