Is Now the Right Time to Refinance Your Mortgage in 2025?

After two years of elevated borrowing costs, 2025 is offering a new opportunity for Canadian homeowners: the chance to refinance their mortgage in a lower rate environment.

With the Bank of Canada cutting its overnight rate to 2.75% and fixed mortgage rates slowly easing in response, many are now asking the big question:Is this the right time to refinance my home loan?

Here’s what you need to know.

What Does Refinancing a Mortgage Mean?

Refinancing involves replacing your current mortgage with a new one — typically to secure a lower interest rate, consolidate debt, change term types (from variable to fixed or vice versa), or access equity through a cash-out refinance.

Done correctly, it can reduce your monthly payments, save thousands over time, or free up funds for renovations, investment, or other financial needs.

Why 2025 Is a Window of Opportunity

From mid-2022 through 2024, mortgage rates soared across Canada, with many buyers locking in terms between 5.5% and 6.5%. Now, with rates trending downward, homeowners are revisiting their mortgage terms in search of savings.

Even a half-point drop — from 5.59% to 4.99%, for example — can save a homeowner with a $600,000 mortgage over $150 per month, or nearly $9,000 over a 5-year term.

In high-cost markets like Surrey, Abbotsford, and the Greater Vancouver region, the savings potential is even greater.

Who Should Consider Refinancing Now?

• Borrowers locked in at high fixed rates (2022–24)

• Variable-rate borrowers impacted by rising prime

• Homeowners with high-interest consumer debt

• Equity-rich homeowners seeking liquidity

Even those with several years remaining in their term may benefit — particularly if the savings outweigh the cost of breaking their mortgage.

But What About Penalties?

Refinancing mid-term usually comes with a prepayment penalty, especially for fixed-rate mortgages. The cost can range from three months' interest to thousands, depending on your lender’s formula.

That’s why it’s critical to calculate the break-even point. If the new lower rate saves more than the penalty over the next few years, refinancing can still make sense.

Some lenders also offer blend-and-extend options, which let you combine old and new rates into a longer term — reducing the upfront penalty.

Does Everyone Qualify?

Not automatically. To refinance, you must still pass the federal mortgage stress test, which in 2025 means qualifying at either your contract rate + 2% or 5.25% — whichever is higher.

That means borrowers need stable income, solid credit, and manageable debt-to-income ratios. However, homeowners with lower credit or non-traditional income may still qualify through alternative lenders or private options.

Regional Advantage: BC vs Alberta

In markets like Edmonton, where home prices are lower and equity is more accessible, many homeowners are using refinancing to consolidate debt or invest in income properties.

In British Columbia, refinancing is often used to manage cash flow, adjust amortizations, or re-lock into fixed terms at more favourable rates.

What Should You Watch For?

• Penalty vs. Savings: Know your numbers before proceeding.

• Closing Costs: Appraisals and legal fees can add $1,000–$2,000 (often rolled into the loan).

• Term Alignment: Choose a new term that fits your future plans.

• Pre-Approval Timing: Lock in your rate early — lenders offer 90–120 day holds.

Final Thought

Refinancing your mortgage in 2025 isn’t about chasing the lowest rate — it’s about strategically improving your financial position. For many Canadians, it’s a chance to save, simplify, and gain control of their finances in a market that’s finally shifting.

If you’re unsure whether refinancing is right for you, it’s worth having a no-obligation conversation with a licensed mortgage expert. Firms like Sandhu & Sran Mortgages, who serve clients across BC and Alberta, specialize in helping homeowners evaluate refinancing options that align with their goals.