Equity
A refinance can usually go up to 80% of your home's appraised value, including the mortgage you already have.
Alberta refinance and debt consolidation
Refinancing or consolidating debt?
Look past the monthly payment.
A refinance can lower your monthly payments or free up equity, but it is not only a cash-flow decision. Your equity, the cost to break your current mortgage, the new terms and the total interest all belong in the comparison.
Four numbers to check first.
What the money is for
Paying off high-interest debt, renovating and investing each lead to different questions and a different structure.
Cost to break
Fixed mortgages usually charge the higher of three months' interest or an interest rate differential. Add appraisal, legal and discharge fees.
Payment and total cost
A lower monthly payment can still cost more overall if the debt is repaid over a much longer period.
Ways to use your equity.
- Refinance
- Replace your mortgage with a larger one, up to 80% of the home's value. You need to qualify again, including the stress test, and you may pay a penalty if you break mid-term.
- Blend and extend
- Some lenders let you add funds at a blended rate without breaking the mortgage. Policies differ, so compare it with a full refinance.
- Home equity line of credit
- A revolving line you draw on when needed. The line itself can go up to 65% of the home's value, and together with your mortgage up to 80%. Payments can be interest-only, so plan how you will repay the balance.
Debt consolidation, with honest numbers.
Here is a hypothetical example. If your mortgage and other debt payments add up to $3,500 a month and a consolidated mortgage payment would be $2,800, you free up $700 a month. That does not mean you save money. Card balances moved into a 25-year mortgage can cost more interest over time, and the plan only works if those balances stay paid off. I compare the monthly relief with the total cost, and with how quickly you could put part of the $700 back into the mortgage.
Frequently asked questions
How much of my home equity can I access?
With a refinance, usually up to 80% of the appraised value, minus what you still owe. A home equity line of credit on its own is limited to 65% of the value.
Is debt consolidation always a good idea?
Not always. It can lower your monthly payments, but stretching debt over a longer period can raise the total interest. It works best with a plan to keep the paid-off balances at zero.
What does it cost to break my mortgage?
For a fixed mortgage, usually the higher of three months' interest or an interest rate differential. For a variable mortgage, usually three months' interest. Ask your lender for the exact figure, and add appraisal and legal costs.
Sources: FCAC — Breaking your mortgage contract · FCAC — Home equity line of credit
Kyungman Kim · Reviewed · General information only. It is not mortgage advice or an approval, and lender rules and programs can change.
Start with your current numbers.
Tell me what you owe, what you want the funds for and when. We will compare the monthly change with the total cost.
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