NormanLane Real Estate | 709-221-SOLD | 323 Freshwater Road St. John's NL A1B 1C3

When is the right time to refinance my mortgage?

Pulling out some equity from your home to pay off higher interest debts can make sense!

80% is the magic number when looking to refinance.
When seeking a refinance,  the government will only allow you to pull out equity up to 80% of the value of the home.
As an example:
Current mortgage balance: $300,000
Current value of home: $400,000
80% of $400,000: $320,000
Amount of equity that can be withdrawn: $320,000 - $300,000 = $20,000

Here is an example of the math:


$300,000 mortgage, 3% interest rate, 25 year amortization
Payments: $1419.74 per month

Over 5 years:
Principal paid: $41,607.99
Interest paid: $43,576.41

$20,000 credit card debt at 20% interest.
Making the minimum payment over 5 years: $20,000 interest paid.
Monthly interest payment: $333.00 (Not taking into account minimum principal that would be paid - just for illustration)

Total Payments:
$1419.74 + $333 = $1753.07 per month.

Over 5 years:
Principal paid: $41,607.99
Interest paid: $63,576.41


Example #1

$320,000 mortgage, 3% interest, 25 year amortization
Payments: $1,514.39 per month

Over 5 years:
Principal Paid: $46,481.52
Interest Paid: $44,381.88

By combining the $20,000 in credit card debt into the mortgage, this person over the next 5 years would save $19,194.53 in interest and save $14,320.80 in payments.

Example #2

In order to pay the credit card down faster, they can reduce the amortization of the new $320,000 mortgage to match the old payment.
$320,000 mortgage, 3% interest, 20 year, 4 month amortization
Payments: $1,750.50 per month

Over 5 years:
Principal Paid: $61,738.13
Interest paid: $43,291.87

By combining the credit cards into the mortgage and keeping the payments the same as they are currently, this person will save $20,284.54 interest over the 5 years and pay an extra $20,130 worth of principal.

Which means after 5 years they have paid the credit cards in full.

This is just a basic example, but it works with all types of unsecured debts. (car loans, lines of credit, personal loans)

If you'd like us to run the math for your specific situation, feel free to reach out to us!

                                                                                                  [email protected]  or  743-3939

Mark Norman

Not every borrower is the same, while some may have full time jobs, others might be seasonal or self employed. Others have excellent credit,  while some might have bruised credit. Also, not all lenders offer the same mortgage products, so we work with multiple lenders to ensure you always get the best product and rate for your specific borrowing needs and the best news of all, our service is FREE!

Some of our most trusted lender partners include:


Comments are closed.