Thinking of refinancing? Check these 2 numbers first

Refinancing can turn home equity into money for renovations, a large expense, or paying off higher-interest debt. But if you're partway through a term, refinancing usually means breaking your current mortgage. Before you do, run two numbers.

Number 1: how much you can access

Lenders will usually let you borrow up to 80% of your home's appraised value, minus what you still owe. For federally regulated banks, the 80% limit on conventional lending is set in the Bank Act.

Example: a home appraised at $500,000 with $300,000 owing.

• 80% of $500,000 = $400,000
• $400,000 − $300,000 = up to $100,000, before penalties and fees

The value used is the appraised value, not what you hope the home is worth, so a lower appraisal means less available equity. You'll also need to qualify for the new, larger mortgage, including the federal stress test, which applies when you refinance.

Number 2: what breaking your mortgage costs

If you pay off your mortgage before the end of the term, your lender can charge a prepayment penalty. According to FCAC, it will usually be the higher of:

• three months' interest on what you still owe, or
• the interest rate differential (IRD), which compares your rate with a current rate for the time left on your term.

Lenders usually use the IRD when your rate is higher than current rates and you signed less than five years ago. How lenders calculate the IRD varies, especially whether they use posted or discounted rates, and on a fixed mortgage the difference can be thousands of dollars. Ask your lender for a written payout penalty quote. Most banks also have a penalty calculator online.

The other costs of refinancing

• Appraisal to confirm value.
• Legal fees to discharge the old mortgage and register the new one.
• Land Titles registration in Alberta: $50 plus $5 for each $5,000 of the new mortgage principal (fee schedule effective October 1, 2026).
• Possible discharge or administration fees from your current lender.

Add these to the penalty. Then compare the total with what you'd save, for example on interest from consolidated credit card or loan balances.

When another option may cost less

• Wait for renewal. If your term ends soon, there's no prepayment penalty at maturity. You may be able to refinance then. See the renewal checklist.
• Blend-and-increase. Some lenders let you add money to your existing mortgage and blend your current rate with a new one for the extra amount, which can avoid a full penalty. Availability and terms vary by lender.
• A home equity line of credit (HELOC). A HELOC can be combined with your mortgage up to 80% of your home's value, with the revolving portion limited to 65%. It can suit ongoing costs like a staged renovation. See HELOCs in Alberta.

A note on debt consolidation

Rolling high-interest debt into your mortgage can lower your monthly payments, but you're spreading that debt over a longer period, so it can cost more interest over time unless you pay it down faster. It helps to have a plan to avoid building the balances back up. FCAC also reminds borrowers that your home is the security: if you can't repay, the consequences can be serious, up to foreclosure.

Timing this fall

In its September 2, 2026 statement, the Bank of Canada noted that long-term bond yields had moved up globally, including in Canada, and longer-term yields influence fixed rates. The Bank's next decision is October 28, 2026. Whatever rates do, the math above doesn't change: compare the full cost of breaking with the full benefit.

For how a refinance works from start to finish, see mortgage refinancing in Alberta.