Refinancing in Ontario: Top Reasons Homeowners Are Restructuring in 2025

David Jeffrey
Published: May 27, 2025
Last Updated: May 26, 2025

David Jeffrey
Published: May 27, 2025

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Refinancing in Ontario: Top Reasons Homeowners Are Restructuring in 2025

As Ontario’s real estate market continues to evolve and borrowing costs remain volatile, many homeowners are turning to mortgage refinancing as a financial tool to stay ahead. Whether it’s managing rising monthly payments, consolidating high-interest debt, or tapping into home equity, refinancing in 2025 is more relevant than ever.

But why are so many Ontario homeowners refinancing their mortgages? In this blog, we’ll explore the top reasons driving this trend, how the process works, and when refinancing makes financial sense.

What Is Mortgage Refinancing?

Refinancing means breaking your existing mortgage contract and replacing it with a new one, either with your current lender or a different one. The goal is to improve your financial situation by securing better terms, accessing equity, or restructuring your debt.

Depending on the reason, refinancing can lead to:

Lower monthly payments
Access to home equity
Better interest rates
Simplified finances through debt consolidation

In Ontario, refinancing has become increasingly common as more homeowners face mortgage renewals at higher rates, increased living expenses, and a desire to improve cash flow.

Top 5 Reasons Ontario Homeowners Are Refinancing in 2025

1. Consolidating High-Interest Debt

One of the most common reasons homeowners refinance in Ontario is to consolidate unsecured debt, such as:

Credit card balances
Personal loans
Car loans
Lines of credit

With interest rates on credit cards often exceeding 19%, consolidating that debt into a mortgage at 5–8% (even higher in today’s market) can result in substantial monthly savings.

Example:
A homeowner with $50,000 in unsecured debt at 19% interest could pay $950+ per month in minimum payments. By refinancing their mortgage and rolling that debt into a 25-year amortization, their monthly obligation could drop to around $300–$400, freeing up over $500 per month in cash flow.

2. Dealing with Mortgage Renewal Shock

Ontario has seen a wave of mortgage renewals in 2024–2025, and for many homeowners, the rate shock is real.

Imagine going from a 5-year fixed mortgage at 2.49% to a renewal at 6.39% or higher. That kind of jump can add hundreds or even thousands of dollars to monthly payments.

Instead of accepting their lender’s renewal offer, many homeowners are exploring refinancing options with brokers to:

Secure better terms
Switch to a longer amortization to reduce payments
Add or consolidate other debts into the new mortgage

This gives them more financial flexibility during uncertain times.

3. Tapping Into Home Equity

Ontario homeowners have seen significant increases in property values over the last decade, even with recent market corrections. As a result, many have built up substantial equity in their homes.

Refinancing allows you to access up to 80% of your home’s appraised value, minus the amount you still owe on your mortgage. That equity can be used for:

Home renovations
Real estate investments
Paying for post-secondary education
Starting a business
Supporting children with down payments

Rather than taking on higher-interest loans or depleting savings, refinancing offers a cost-effective way to use your home’s equity as a financial resource.

4. Switching Mortgage Types or Terms

Some homeowners refinance to change their mortgage type:

Fixed to Variable: To benefit from lower current rates and more flexibility.
Variable to Fixed: To lock in stability and protect against rate hikes.
Shorter Term to Longer Term: To reduce monthly payments.
30-year amortization (for those eligible): To extend the life of the loan and reduce stress on monthly cash flow.

This is especially valuable for self-employed borrowers or those with irregular income, who need more control over how their mortgage impacts their budget.

5. Rebuilding Credit and Requalifying with a Prime Lender

Homeowners who initially had to turn to alternative lenders or private lenders due to poor credit or unique income situations often use refinancing to move back to an A lender once their financial picture improves.

Steps may include:

Improving credit score
Reducing outstanding debt
Demonstrating consistent income

Refinancing in this case allows them to escape higher private or alternative rates (often 7–12%) and requalify for lower-cost financing with a bank or credit union.

Is Refinancing Always the Right Move?

Not necessarily. Refinancing can come with penalties, fees, and closing costs, especially if you’re breaking a mortgage early. Before refinancing, consider:

Prepayment penalties: Often three months’ interest or an Interest Rate Differential (IRD)
Appraisal fees, legal fees, and lender fees
New amortization period (may reset your timeline)
Potential for higher overall interest if extending the loan

It’s essential to work with a licensed mortgage broker in Ontario who can run the numbers and determine whether the benefits outweigh the costs.

When Should You Refinance in Ontario?

Timing matters. Here are some ideal moments to consider refinancing:

Before your mortgage renewal: You can avoid penalties and shop for better terms.
When interest rates are lower than your current rate: Save money over the long term.
When your credit has improved: You may qualify for better rates.
When your home value has gone up: You can tap into equity.
When cash flow is tight: Consolidating debts can improve monthly budgeting.

How the Refinancing Process Works

Determine Your Goals: Are you looking to lower payments, access equity, or consolidate debt?
Assess Your Current Mortgage: Understand your payout penalty and remaining amortization.
Check Your Equity: A new appraisal may be needed.
Gather Financial Documents: Proof of income, credit report, property tax statements, etc.
Apply Through a Broker or Lender: Compare multiple options to find the best deal.
Close the New Mortgage: Pay out the old mortgage and start fresh under the new terms.

Why Work with a Mortgage Broker in Ontario?

A broker can provide access to multiple lenders, including A lenders, B lenders, and private options, giving you more flexibility based on your unique financial needs.

Benefits of using a broker include:

Better interest rate negotiation
More lending options beyond the banks
Expertise in structuring refinances and consolidations
Objective advice with your financial goals in mind

Conclusion: Restructuring for a Stronger Financial Future

Whether you’re trying to tame high-interest debt, manage rising mortgage payments, or unlock your home’s hidden value, refinancing can be a powerful tool for Ontario homeowners in 2025.

But like any financial decision, refinancing should be approached strategically. Make sure you understand the costs, calculate the long-term impact, and work with a qualified mortgage professional who puts your interests first.

By taking the time to assess your situation and options, refinancing can transform your mortgage from a burden into a solution for long-term financial freedom.

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David Jeffrey

Hi there, I’m one of the founding members of Lendtoday.ca. Our journey to start this business began with friendship and a belief we could help people solve their mortgage problems. We wanted to provide a safe space for people to be heard and not judged. I’ve spent many years in the accounting and financial industry and heard the same thing repeatedly from friends and colleagues. “When we try to get anything done, we’re treated like a number and not a person". To me this made no sense. Taking the human and personal connection away removed an important piece of the relationship. Hearing what people needed was really the fastest way to solve their problems. I felt that my experience in working closely with people would be well suited for an industry that is slowly moving away from personal interactions.