Mortgage Refinancing in Quebec: Is It Worth It?

Three requests land on the same desk under three different names: renew, transfer, refinance. Only one of those opens a new loan, triggers a penalty and gets registered all over again at the registre foncier (Quebec’s land register). It is almost always the one the client calls by another name. Here is how to know which one you actually want, and how to check whether it holds up.

Renewing, transferring, refinancing: three different moves

The renewal. At the end of the term, with the same lender. The balance and the amortization carry on, no new loan is created. The Financial Consumer Agency of Canada (FCAC) states that a federally regulated lender has to give you a renewal statement at least 21 days before the end of the term, and warns that if you do nothing, the renewal can be automatic. You are probably not getting the best rate that way.

The transfer. Same moment, different lender. Same balance, same remaining amortization, no penalty since the term has run out. What changes is the cost of opening the file with the new lender: according to FCAC, discharge, registration, transfer or assignment fees. Since December 16, 2024, the Department of Finance Canada has removed the obligation to apply the minimum qualifying rate to low-ratio loans that change lenders at renewal. Three conditions: the contractual amortization is kept, no equity take-out is allowed, and the balance can only go up by $3,000 to cover the cost of the transaction.

The refinancing. This is where you break something. You reopen the loan before maturity, or you increase the balance, or you change the amortization. It is a new loan: full qualification, a new registration at the registre foncier, and a penalty if the term is not finished.

The 80% ceiling that frames every mortgage refinancing

This ceiling is not a bank policy, it is a law. Section 418 of the Bank Act prohibits a bank from making a loan secured by residential property that, together with claims of equal or prior rank, exceeds 80% of the value of the property. The only way out, set in the same section: the excess portion has to be guaranteed or insured by a government agency or by an approved private insurer.

And an ordinary refinancing cannot be insured. Since November 30, 2016, the Department of Finance Canada has imposed seven criteria on the insurance of low-ratio loans. The first one targets the purpose of the loan: the purchase of a property, or the subsequent renewal of such a loan. A refinancing is neither. No insurance, therefore no way past the 80%.

The arithmetic is a surprise. Home recognized at $600,000, balance of $380,000: the ceiling is $480,000. You are not pulling out $220,000 of equity, you are pulling out $100,000 at best, before fees.

If part of the amount takes the form of a line of credit. Guideline B-20 from the Office of the Superintendent of Financial Institutions expects federally regulated institutions to limit the non-amortizing component of a home equity line of credit to an authorized loan to value ratio of no more than 65%. Whatever goes beyond that has to be amortized.

One exception has existed since 2025. For insurance applications submitted on or after January 15, 2025, an insured refinancing is allowed if the money is used to build additional housing units: up to 90% of the value after the work, value under $2,000,000, amortization of 30 years at most, four units maximum. SCHL (CMHC) adds that the unit created cannot be rented for periods of less than 90 consecutive days.

The penalty, the number that decides everything

A closed loan breaks against a penalty. FCAC is clear: an open loan can be paid off without a prepayment penalty, a closed loan cannot. The penalty is usually the higher of two amounts, either three months of interest on the outstanding balance, or the interest rate differential.

The differential is not calculated in a single way. FCAC explains that the lender compares two rates. For the first one: the posted rate at the time you signed, or your current or discounted rate depending on the contract. For the second: the current posted rate for a term of similar length, or that rate minus the discount you were given at the start. Four combinations, four results.

The agency’s worked example shows the size of the gap. Balance of $200,000, rate of 6%, 36 months remaining, current posted rate of 4% for a 36 month term. Three months of interest gives $3,000. The differential gives $12,000. It is the $12,000 that is payable, plus possible administration fees.

Hold on to the mechanics: the differential only bites if the current rate for a comparable term is lower than yours. If they are equal or higher, it collapses toward zero and the three months of interest is what remains. For context, the Banque du Canada (the Bank of Canada) held its target for the overnight rate at 2.25% on September 2, 2026.

Before you pay anything at all, measure the gap in your payment with the mortgage calculator. If the savings added up over the months left in the term do not cover the penalty and the fees, the answer is already in front of you.

What you lose by breaking an insured loan

The premium was paid once, and it does not come back. The SCHL (CMHC) scale for an owner-occupant loan runs from 0.60% of the loan amount up to a loan to value ratio of 65%, to 4.00% between 90.01% and 95%. On a $400,000 loan taken out at 95%, that is $16,000 added to the loan.

The tax, on the other hand, left your account. SCHL (CMHC) specifies that certain provinces, including Quebec, apply a provincial sales tax on the premium, and that this tax cannot be added to the loan amount. It is paid in cash at closing. On that item, see the real cost of SCHL insurance.

Portability will not save you. SCHL (CMHC) allows an existing insurance to be carried over to a new property, with a premium credit of 100% within six months of the initial closing, 50% within twelve months and 25% within twenty-four months. But it serves a purchase: SCHL (CMHC) requires that the property be sold and that the new loan finance the acquisition of the next one. A refinancing triggers none of that. You break an insured loan, the premium stays paid, and the loan that replaces it cannot be insured in turn.

The fees to add up before you say yes

FCAC lists what you should have quoted before breaking a contract: the penalty, the administration fees, the appraisal fees, the reinvestment fees, and the discharge fees to strike the current charge and register a new one. If you had received cash back at signing, a portion may also have to be repaid.

In Quebec, two of these items have a public price. Here is the registre foncier tariff, in force since April 1, 2026.

The rest has no set tariff. The Quebec government points out that only notaries and lawyers are qualified to prepare a discharge, that fees are payable to publish it, and that striking a charge is in no way automatic: it has to be requested. See the notary’s role in Quebec. For appraisal fees, no public tariff exists: ask for the amount in writing before you authorize the order.

The three situations where mortgage refinancing holds up

High-rate debt that is choking the budget. FCAC puts it without enthusiasm: consolidating high-interest debts into a lower-rate product may save you money, but it can stretch out the repayment period and cost more in interest over time. The condition is easy to state and hard to keep: hold the amortization, do not stretch it. Its report on home equity lines of credit shows why: 25% of consumers only pay the interest or the minimum.

Work that creates a housing unit. This is the only case where the 80% ceiling lifts, up to 90%, under the rules in force since January 15, 2025. The money has to serve to build the unit or units, and the additional financing cannot exceed the cost of the project.

A down payment on an income property, at the right moment. Pulling equity out to acquire an asset that produces income holds up, on the condition that the penalty is small or nil: close to the end of the term, or when the differential collapses. The down payment thresholds are in building a real estate portfolio.

And one case where it almost never holds up: refinancing over 25 years an expense that will be dead in five.

The file to prepare for a refinancing in Quebec

• The up to date mortgage statement: balance, end of term, rate and prepayment privileges.
• The written calculation of the penalty, with the method and the two rates used. Not a verbal estimate.
• The certified statement of rights, at $17, to see the charges still registered against the property. Every additional registration to be struck adds $101.
• The tax accounts paid up, and the certificat de localisation (location certificate) if your lender requires it.
• Proof of income and the list of your debts: this is a new application, not a renewal.
• The name of your notary, chosen early rather than late.

I am a real estate broker, not a lender and not a notary. My role stops at the value of the property and at what that value allows.

Frequently asked questions

I want to refinance during my term. Is that possible? Yes, on a closed loan, against a penalty. Ask for the amount in writing before any other question. If the penalty is bigger than the savings over the remaining months, waiting for maturity costs less than acting today.

My neighbour says he refinanced with no penalty. How? Two likely explanations. He transferred his loan at maturity, which is not a refinancing. Or he used a blend and extend option, which FCAC describes as a way of extending the loan before the end of the term without a penalty, the lender blending the old and the new rate.

Do I have to pass the stress test again? For a refinancing, yes: it is a new uninsured loan. The December 16, 2024 exemption covers only low-ratio loans that change lenders at renewal, and it excludes any equity take-out.

Can the bank say no after the appraisal? Yes. The 80% ceiling is calculated on the value the lender recognizes, not on the one you hope for and not on the municipal assessment. A gap on the low side reduces the amount available, sometimes enough to make the whole operation pointless.

To go further, read what gets decided before your mortgage rate and how interest rates reach the Montreal market.

Weighing a refinancing on a property in Laval, Montreal or the North Shore and want to know what it is worth first? Write to me. The opinion of value is free and comes with no obligation.

Georges Matar

Residential Real Estate Broker · RE/MAX DU CARTIER INC.

Contact Georges