Refinancing is any time that you change your mortgage during the current term of the mortgage. You may change the mortgage for a lower interest rate or the amount of the mortgage. Some people will take advantage of a low mortgage interest rate and increase their mortgage to pay off debt that they have that is at a high interest level. Refinancing can make sense when you look at the over all financial picture to see if it would benefit you to make the change. When you do decide to refinance and break your current mortgage term, you will end up having to pay a mortgage penalty. The mortgage penalty will either be three months interest or IRD (Interest Rate Differential) which ever one is greater on a fixed rate mortgage. If you have a variable rate mortgage you will only have to pay the 3 months interest penalty. If you have an open mortgage you will not have any penalty to pay but your interest rate will typically be higher then that of a closed variable or fixed interest rate.
When making the decision on whether to refinance it is best to talk to your mortgage broker about it and review your entire situation, current and future goals with them. Your mortgage broker can do an Annual Review and look at any cost savings after factoring in the amount of the mortgage penalty. You could potentially save thousands of dollars or it may be worth it to wait till the end of your term. Your mortgage broker will be able to go into detail with their calculations and provide you with a report detailing the results so you can make the best decision that is right for you based on accurate information and your goals.