Refinancing Your Mortgage in BC: When It Makes Sense and What It Costs

Refinancing replaces your mortgage with a larger one, turning some of your home's equity into money for debts, renovations or buying out a co-owner. Here is how it compares with renewing, blending and a line of credit in BC, how much you can borrow and what it costs.

The short version

Refinancing, renewing, blending or a line of credit

Here is how the options differ:

• Renewing. When your term ends, you sign a new term for what you owe, with your lender or a new one. There is no prepayment penalty, but no new money either. I explain the timing in Renewing Your Mortgage.
• Refinancing. You replace your mortgage with a new one, usually with a new term and rate, and borrow more against your equity. You qualify again, and before your term ends you usually pay a penalty.
• Blending. Some lenders let you add money to your existing mortgage during your term, at a blended rate. RBC, for example, describes a mortgage add-on that blends your existing rate with its current rate for a three-year term, based on a current appraisal. I cover blending when you move in Porting, Blending or Breaking.
• A home equity line of credit (HELOC). A revolving line secured by your home. The Financial Consumer Agency of Canada (FCAC) says it can be up to 65% of your home's value, usually at a variable rate based on prime, and that paying only the interest won't pay it off.
• A second mortgage. Your first mortgage stays in place, but FCAC says rates are usually higher than on a first mortgage.

If you are 55 or older, the usual minimum age, a reverse mortgage is another option, which I compare with a line of credit in Reverse Mortgages and Home Equity in Retirement.

How much you can borrow, and why it can't be insured

FCAC says you may usually borrow up to 80% of your home's value, and BMO, for example, describes refinancing as up to 80% of the current value, minus what you still owe. On a home worth an example $900,000, that is $720,000, so with $500,000 owing you could borrow up to $220,000 more, if you qualify. A HELOC or second mortgage counts toward the same limit.

The limit comes from federal rules. Under the Bank Act, a bank generally can't lend more than 80% of a home's value to buy, renovate or improve it, or to refinance such a loan, unless the excess is insured. Under the federal Eligible Mortgage Loan Regulations, government-backed insurance generally covers only a loan whose purpose includes buying the home, or one that pays off an existing loan's balance. Taking equity out is neither, so a refinance generally can't be insured, even when your current mortgage is. Two situations can still be insured:

• Adding a secondary suite. Since January 15, 2025, an insured loan can pay for new units, such as a suite, in a home you or a close relative live in: up to 90% of its estimated value after the work, if that value is under $2 million, over up to 30 years. CMHC says its financing must be approved before construction starts, or at least at an early stage, and equity take-out isn't permitted. See Buying a Home with a Suite.
• A buyout between owners. Sagen, a mortgage insurer, treats an equity buy-out between owners who are both on title as a purchase, proven by an agreement of purchase and sale, a finalized separation agreement or a court order. As with an insured purchase above 80%, the home must be worth under $1.5 million, and the loan can't exceed 95% of the first $500,000 of value plus 90% of the rest.

Qualifying again, including the stress test

A refinance is a new approval: your lender looks again at your income, debts and credit, and the payment has to fit its debt service limits, which I explain in How Much House Can You Afford?

• The qualifying rate. The Office of the Superintendent of Financial Institutions (OSFI) expects banks and other federally regulated lenders to qualify you at the greater of your contract rate plus 2% or 5.25%.
• No switch exemption. OSFI's stress test exemption for moving an uninsured mortgage to another federally regulated lender at renewal covers only a straight switch: no longer amortization, no equity take-out and no new money beyond $3,000 for costs.
• Lines of credit too. FCAC says a HELOC at a bank also needs a stress test. If you are refinancing with a credit union, ask how it qualifies you.

What refinancing costs

BMO says that, in general, it's best to refinance near the end of your term. Here is what to budget for:

• A prepayment penalty, mid-term. Paying off a closed fixed-rate mortgage before your term ends usually costs the higher of three months' interest and the interest rate differential, which can be much larger, and FCAC notes an administration fee may apply too.
• Legal fees. A lawyer or notary usually registers the new mortgage on your title. BMO estimates legal fees of up to about $1,000.
• An appraisal. BMO puts it at around $300. FCAC also lists title search and title insurance fees.
• Land title fees. As of April 1, 2026, the Land Title and Survey Authority (LTSA) charges $83.82 to register a mortgage and $33.53 to register a discharge, plus a small service charge for filing electronically.
• A discharge fee. If you leave your lender, BMO says it is typically around $400.

Ask for the penalty and an estimate of the other costs in writing before you apply.

Debt consolidation: a worked example

Say your home is worth an example $900,000, you owe $500,000 and your term is ending. You also owe $15,000 on credit cards at an example 20%, which you plan to clear in three years, and $25,000 on a car loan at an example 7% with four years left. That is about $1,156 a month, and about $8,800 in interest in total. Add the $40,000 to your mortgage at an example rate of 4.5%, compounded semi-annually:

• Over 25 years. It costs about $221 a month, about $935 less than today, but about $26,400 in interest, three times as much.
• Paid down quickly. Keep paying $1,156 a month toward it, if your prepayment privileges allow, and it is gone in about 37 months with about $2,900 in interest, about $5,900 less than today.
• Mid-term. Partway through your term, a penalty of at least three months' interest on $500,000 at 4.5%, about $5,625, would use up almost all of that saving, before legal and appraisal costs.

At $540,000, the new mortgage is 60% of the home's value, within the limit. The lower rate only helps if you keep paying the debt down. FCAC warns that easy access to funds may tempt you to take on more debt than you can pay back, and that not repaying money borrowed against your home can lead to foreclosure.

Buying out a partner or paying for renovations

• Buying out a co-owner. You will usually need to qualify on your own income, and if you are both on title, ask whether the buyout can be insured as a purchase. Gaining the other share generally means property transfer tax on its fair market value, unless an exemption applies, such as the one for a transfer resulting from a marriage breakdown. On a 50% share of an example $900,000 home, the tax is $7,000. See Separation and the Family Home, or Co-Buying a Home for buyouts between friends or family.
• Renovations. A refinance gives you the money up front. A HELOC lets you borrow as the work goes, up to your credit limit. For a suite, ask about the insured option above. Get written quotes and any permits you need first, and leave room for surprises.

Questions owners often ask me

How much equity can I take out when I refinance?

In most cases, up to 80% of your home's value, minus your mortgage and any other loans secured by the home. With $500,000 owing on an example $900,000 home, that is up to $220,000, if you qualify.

Can I refinance without paying a penalty?

Yes, at the end of your term, when a closed mortgage can be paid off without a prepayment penalty. During your term you usually pay one, so ask your lender whether it can add money to your existing mortgage at a blended rate instead.

Do I have to pass the stress test to refinance?

At a bank or other federally regulated lender, generally yes. You qualify at the greater of your contract rate plus 2% or 5.25%, and the exemption for switching lenders doesn't apply when you borrow more.

Is a HELOC better than refinancing?

It depends. A HELOC lets you borrow as you go, usually at a variable rate, up to 65% of your home's value, but paying only the interest won't pay it off. A refinance adds the money to your mortgage, which you repay on a schedule.

Should I roll my credit card debt into my mortgage?

It can lower your rate and your payments, but it can cost more interest overall. In my example, $40,000 over 25 years would cost about $26,400 in interest, against about $8,800 on the original debts, so it pays to clear it quickly.

Weighing your options? Read Paying Off Your Mortgage Faster, try my mortgage calculator or request a free home evaluation to see what your home might be worth.

This article is general information, not financial advice. The examples use example rates, with the mortgage compounded semi-annually; they are illustrations, not quotes. The details come from FCAC, OSFI, CMHC, Sagen, LTSA, the Province, federal law and lenders' own websites, and were current at the time of writing. For FCAC's guide, see borrowing against home equity.