Should I Refinance My Mortgage in Alberta?
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·Reviewed by a mortgage professional
Short answer
Refinancing can make sense when the monthly savings (or strategic benefit) outweigh the penalty and closing costs over the time you plan to keep the mortgage — but it is not automatic. Model your balance, new rate, penalty, and break-even before you sign.
The plain-English version
Refinancing replaces your existing mortgage with a new one — often to lower your rate, access equity, or consolidate debt. The trade-off is breaking your current term early, which usually triggers a prepayment penalty.
Break-even is simple math: divide your total cost to refinance (penalty plus legal/appraisal fees) by your monthly savings. If you plan to move or renew soon, a longer break-even period may not be worth it.
Alberta-specific considerations
- Alberta homes can often be refinanced up to 80% of appraised value — usable equity depends on your balance and qualification.
- Property values vary by market; an appraisal may come in higher or lower than your estimate.
- Consolidating unsecured debt into your mortgage lowers monthly payments but can increase total interest if amortization resets.
Example scenario
A homeowner with a $380,000 balance at 6.25% might save about $200/month at 5.49% on the same amortization. With a $3,500 penalty, break-even is roughly 18 months — reasonable if they stay in the home longer than that.
Common mistakes to avoid
- Refinancing only for a slightly lower rate without calculating break-even.
- Ignoring that extending amortization lowers the payment but increases total interest.
- Consolidating debt without changing spending habits.
- Assuming your home value equals the number in your head — get an appraisal reality check.