Should I Refinance My Mortgage in Alberta?
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.