Refinancing Your Home: How Much Equity Can You Access

If you're carrying an auto loan, a line of credit, and a couple of high credit card balances all at once, you already know what that feels like at the end of the month. Multiple due dates, multiple interest rates, a chunk of your income gone before groceries. A refinance is one of the main tools I use with clients to make that mess go away.

What Refinancing Your Mortgage Actually Does

A refinance is when you access the equity in your home. That equity can go toward investments, paying off high interest debt, getting a lower mortgage rate, or a few other purposes. The maximum we can pull out is up to 80% of your property value. So if your home is worth $1 million, we can pull out up to $800,000 in equity.

Say your home is worth $1 million and you have an existing mortgage of $300,000 on it. We can access up to $800,000 in total equity, and part of that pays out your existing $300,000 mortgage. What's left, in this case $500,000, is yours to use however you want.

Put it into investments or the stock market. Use it to pay off high interest debt like auto loans, lines of credit, high credit card bills, and personal loans. Renovate your home. Fund your child's education. Most lenders do not restrict where those funds go.

Where Some Lenders Draw the Line

Some do restrict it. If the equity you're pulling out is more than $250,000, certain lenders will direct where those funds land. As an example, a lender might require that $250,000 or more in equity be directed straight into an investment account. They typically do this when they view the borrower as higher risk and have concerns about where the money is going.

The Debt Consolidation Refinance Most Clients Actually Want

Most of the people I help through a refinance are accessing equity to pay off debt and consolidate everything into one easy monthly mortgage payment. In some cases, we have saved clients thousands of dollars per month once we lay out the difference between all their separate debts and what one combined mortgage payment looks like instead.

Part of how that works is re-extending the amortization, sometimes up to 30 years, or 25 years if they were sitting at a much shorter amortization already. Stretching that out frees up cash flow and drops the monthly payment. Once a client is in a better spot financially, they can increase payments, put money directly toward principal, or double up payments, and that speeds the amortization back up. Most clients start on a 30 year amortization for breathing room, then pay it down faster once things stabilize.

I walk through this math in the video below.

Cash Out vs. a Secured Line of Credit

When refinancing, you may also have the option to add a secured line of credit, as long as it doesn't exceed 65% of your home's value. If you're pulling out equity but you're not sure exactly what you'll use it for, a line of credit is often the smarter move, because you only pay on what you actually borrow.

If you have a $100,000 line of credit sitting at a zero balance, you're not paying anything on it until you draw on it. Compare that to accessing a $300,000 mortgage where $100,000 is sent directly to your bank account as cash. Your mortgage balance is now $200,000 plus that extra $100,000, and you pay interest on the full amount right away, whether you've spent it or not.

So if you're not sure when, or if, or what you'll use the funds for, a secured line of credit tied to your home can make more sense than pulling everything out as cash. Some lenders will even increase your line of credit limit as you pay down your mortgage over time.

Costs to Expect and How They're Usually Handled

Refinancing typically involves legal fees and an appraisal cost. In most cases, your broker can roll those costs into the refinance itself, so you're not paying out of pocket at closing. If you're weighing whether refinancing makes sense for your situation, our mortgage services page outlines what we look at when we run the numbers for a client.

If any of this sounds like it applies to you, accessing equity to pay off debt, increasing monthly cash flow, or putting equity toward another opportunity, the first step is getting your specific numbers reviewed. You can start that conversation through our pre-approval process whenever you're ready.

Talk it through with a broker

Every file is different, and the right answer depends on your income, your timeline, and which lenders will actually work with your situation. If you want a straight read on where you stand, book a mortgage review and we will go through it together.

Linden Crain is a licensed mortgage broker (FSRA #M22004731) with Dominion Lending Centres, Elite Mortgage Group, serving Windsor-Essex and Ontario. This article is general information, not personalized financial advice. Mortgage products, rates, and qualification rules change and vary by lender and by applicant.