Bought a Home in Alberta in 2020? Renew vs. Refinance Guide
If your mortgage term is coming to an end, you have two main options: renewing with your current lender or refinancing to access better rates, lower payments, or new investment opportunities. With interest rates on the rise and Alberta’s real estate market experiencing significant growth, homeowners are considering refinancing not just as a way to manage costs, but also as a strategy to build long-term wealth.
Renewing vs. Refinancing: What’s the Difference?
Renewing Your Mortgage
When your mortgage term ends, renewing allows you to sign a new term with your existing lender while keeping the same balance and amortization schedule. Your lender will offer you a new interest rate based on current market conditions, but you won’t be able to borrow additional funds or make major changes to your loan structure.
A straight renewal might make sense if you don’t need to access equity, don’t need to switch lenders for a better mortgage product, and are focused on securing the lowest rate rather than future financial opportunities.
However, interest rates have increased since your last term, renewal could lead to significantly higher monthly payments. Additionally, renewal does not allow you to tap into your home’s equity, limiting your financial flexibility.
Refinancing Your Mortgage
Refinancing allows you to make changes to your mortgage that align with your financial goals. This could mean:
Extending your amortization to reduce monthly payments.
Switching to a new lender to secure a lower interest rate or better terms.
Borrowing more against your home’s value to access built-up equity.
Consolidating high-interest debt into your mortgage for lower overall costs.
Refinancing is a strategic tool not only for managing mortgage payments but also for leveraging home equity as an investment. Alberta’s economy is strong, and home values continue to rise, making this an opportune time for homeowners to reinvest in additional properties.
How Higher Interest Rates Impact Your Decision
Homeowners who secured mortgages at rates as low as 1.70% five years ago may now be facing renewal rates of 4.50% or higher. This shift could result in higher monthly payments, sometimes increasing by hundreds of dollars. One way to manage this is by refinancing and extending the amortization, which spreads payments over a longer period, reducing monthly costs.
Rates are for illustrative purposes only. OAC.
By refinancing and adjusting the loan structure, homeowners can maintain manageable monthly payments while positioning themselves for future financial growth.
Using Home Equity as an Investment Strategy
Refinancing is not just about managing mortgage payments—it can also be an opportunity to leverage home equity for further investment. With Alberta’s economy growing and real estate markets remaining strong, some homeowners are using refinancing to pull equity from their current home and purchase a second property.
Instead of keeping all home equity tied up in a single property, refinancing allows homeowners to benefit from appreciation on multiple homes, not just one. If a homeowner has significant equity in their primary residence, they may be able to use those funds as a down payment on an investment property in Alberta—one of Canada’s fastest-growing real estate markets.
This strategy allows homeowners to:
Take advantage of Alberta’s affordable home prices compared to other provinces.
Generate rental income to offset mortgage costs.
Benefit from appreciation on multiple properties, increasing overall wealth.
Other Reasons Albertans Are Refinancing
Relocating Within Alberta
With more people moving to secondary markets like Red Deer, Lethbridge, and Grande Prairie, refinancing can help homeowners keep their existing home while purchasing a new property in areas with strong growth potential and more affordable home prices.
Debt Consolidation
Refinancing allows homeowners to roll high-interest debts into their mortgage, reducing overall monthly payments and simplifying finances. With Alberta’s lower cost of living, this can be a smart way to pay down debt faster while maintaining financial stability.
Is Refinancing Right for You?
If your mortgage is up for renewal, now is the time to explore your options. Whether you want to lower your payments, access home equity, or reinvest in Alberta’s growing real estate market, refinancing could be a powerful financial move.
Contact Merge Mortgage Group today to discuss your options and see how you can make the most of your home’s equity.
