Mortgage Refinancing

Using your home equity to borrow money is called "Refinancing". Let's say you have a property, which is worth $100,000. Your balance on that is $40,000 and your equity is $60,000. You can use your home equity without selling the property. Whether it is a new car purchase, vacation, wedding or simply home renovations, your home equity can work for you.

The benefits of using your equity through re-finance are great. The interest rates are cheaper (because the loan is secured against your existing property), and it is a little easier to get approved.

The disadvantages of refinancing your homes are

1) You are using your home equity which you have spent years to build. You want to make sure you are using home equity for a good reason, because that is your hard earned savings.

2) Refinancing applications are just like new mortgage applications, most of the times an appraisal is also required, so it takes a little bit more time than regular unsecured loan applications.

Refinancing in Canada can be done with all major financial institutions. In Canada, you can use up to 80% of your equity. That means you always have to have 20%. Which is good because that means you will always own at least 20% of your house.

For example, if your $100,000 house has a $40,000 balance. That means you can use $40,000 of your home equity. How did we get that number? Let's do a quick math here:

With your house value being $100,000, you have to keep 20% of it with yourself, this 20% or 20,000 is untouched. That means you can from 80% of the value. Out of 80% or 80,000, you already owe $40,000 in the balance which you still have to pay. That means you have $40,000 available to use through re-finance.

If it is too confusing, use our Mortgage Refinance Calculator to see how much of your home equity you can access.

In Canada, refinance can also be done in the form of a line of credit. A bank can use your home equity and give you a home equity line of credit. That is a very good option for you if you want to have funds available for emergencies in the form of a line of credit.