A home renovation, a major expense, or a plan to consolidate debt can prompt you to take a closer look at your finances. If you have owned your home for several years, some of the borrowing capacity you need may come from the equity you have built along the way.
Refinancing can allow you to access part of that equity by replacing your existing mortgage with one that is better suited to your needs. The new mortgage pays off your current balance, with the remaining funds available after applicable costs and any required debt repayments.
Marathon Mortgage offers refinancing options for homeowners whose financial needs have changed. Before deciding whether refinancing fits your plans, it helps to understand how much equity may be available, what qualification involves, and how additional borrowing would affect your budget.
Your home equity and your borrowing potential
Home equity is the difference between your property’s current value and the outstanding debts secured against it. It can increase as you pay down your mortgage or your property rises in value. If your home’s value falls, your equity can decrease.
That equity is part of your net worth, but it is not cash sitting in an account. Accessing it through refinancing means borrowing against your property and repaying that amount with interest.
For a standard refinance in Canada, total borrowing secured against the home is generally limited to 80% of its appraised value, subject to qualification and lender requirements. The amount you may access is therefore different from your total equity.
Consider this illustrative example, assuming no other debts are secured against the property:
| Calculation | Amount |
|---|---|
| Appraised home value | $700,000 |
| Existing mortgage balance | $400,000 |
| Total home equity | $300,000 |
| Potential new mortgage at 80% of appraised value | $560,000 |
| Potential additional borrowing before costs | $160,000 |
In this example, the homeowner has $300,000 in equity, but potential additional borrowing of $160,000 before costs. Approval for that amount is not guaranteed.
The calculation establishes a starting point. Your income, existing obligations, property, and mortgage product will help determine the actual amount available.
Start with what you need to accomplish with the money
Before focusing on the maximum you could borrow, identify the amount that would support your goal.
For a renovation, that might mean gathering contractor estimates and allowing room for unexpected expenses. For debt consolidation, it means listing the balances you want to repay, their interest rates, and their current payment schedules.
This preparation helps keep the refinancing conversation focused. A homeowner with substantial available equity may only need a portion of it to complete a project. Borrowing less can help limit the increase in mortgage debt and preserve more equity in the property.
It also gives you a clearer way to assess the outcome. If you need $50,000 for home improvements, the proposed refinance should show whether you will receive that full amount after accounting for closing costs and any other required deductions.
How the refinancing process works
Refinancing involves reviewing both your existing mortgage and the proposed replacement. The lender assesses your application, confirms the property value through its required valuation process, and determines whether the new mortgage meets its lending requirements.
You will generally need to provide current income information, details of your debts, and documents relating to your property and mortgage. Having these ready can help reduce delays, although the exact requirements depend on your circumstances.
The lender also considers your ability to afford the new mortgage. A mortgage stress test may apply, assessing affordability at a qualifying rate above the actual contract rate. Having sufficient equity does not replace the need to qualify for the additional borrowing.
Once the application is approved and the closing conditions are satisfied, the new mortgage pays out the existing loan. Any remaining proceeds are distributed according to the closing arrangements. Where the refinance includes debt consolidation, funds may be directed toward paying creditors.
Marathon Mortgage works with mortgage brokers on refinancing applications. Your broker can help prepare the required information and explain the proposed mortgage, while Marathon completes its underwriting review.
Look beyond the amount you receive
The additional funds are only one part of the decision. Refinancing also changes the mortgage attached to your home, so the full cost deserves attention.
If you pay out a closed mortgage before the term ends, a prepayment charge may apply. Depending on the transaction, you may also face appraisal, legal, discharge, registration, or administration costs. Your existing contract may require repayment of a previous cash-back incentive.
Ask for a written breakdown that shows:
- The proposed mortgage amount.
- The balance required to pay out your current mortgage.
- Any debts being repaid through the transaction.
- Applicable charges and closing costs.
- The net funds available to you.
Then review the new interest rate, payment, amortization, and prepayment privileges together. A lower rate does not automatically make refinancing less expensive, so a proper conversation to address any fees, repayment timeline, and the overall plan is key, when making proper decisions around refinancing, debt consolidation, or rebalancing your mortgage.
Timing the refinance around your mortgage term
Your mortgage’s maturity date can affect the cost of accessing equity.
If the term is nearly finished, arranging a refinance at maturity may help avoid a charge for paying out the mortgage early. Other transaction costs can still apply, and you will need approval for the additional borrowing.
A standard renewal does not automatically release equity. It continues your outstanding mortgage into a new term. If you want to borrow more, raise that request early enough for the broker or lender to assess it before your intended closing date.
If your goal is simply to change your rate or payment structure, additional borrowing may not be necessary. Depending on the lender and mortgage, an early renewal, conversion, or blend-and-extend option may be available. These arrangements do not automatically provide access to additional funds.
Existing Marathon Mortgage clients should contact Marathon directly to discuss their current mortgage, timing, and available options.
Build a repayment plan that fits your life
A refinance should support your finances beyond the immediate expense.
Consider how the proposed payment fits alongside property taxes, utilities, maintenance, and everyday spending. Leave room for unexpected costs and think about upcoming changes, such as retirement, education costs, investing, moving, or a reduction in household income.
If you are consolidating debt, plan how you will avoid rebuilding the balances that have been paid off. Otherwise, you could end up with both a larger mortgage and new consumer debt.
Remember that the additional borrowing is secured against your home. Missed payments can put the property at risk. Choosing an amount and repayment schedule you can comfortably manage is just as important as qualifying.
To explore a new refinance with Marathon Mortgage, speak with your mortgage broker about Marathon’s refinancing options. If you are already a client, contact Marathon Mortgage directly to discuss your existing mortgage and next steps.
FSRA Brokerage License #12188
Disclaimer: The information provided in this article is for general educational purposes only and should not be considered financial, legal, tax, or accounting advice. Any examples, calculations, payment estimates, or scenarios are illustrative only and are not guarantees or forecasts of future interest rates, mortgage payments, or market conditions. Mortgage rates, products, terms, policies, features, and eligibility requirements are subject to change without notice and may vary based on the applicant, property, province, and transaction. All mortgage applications are subject to underwriting review, approval, and applicable conditions. Every borrower’s situation is unique. Existing Marathon Mortgage clients should contact Marathon Mortgage directly regarding their mortgage, renewal options, or product features. Information is current as of the publication date and may change over time.
