Free Canadian Mortgage Tool
Equity Takeout Calculator — Refinance vs Second Mortgage
There are two ways to take equity out of a Canadian property: refinance into a larger first mortgage, or leave the existing mortgage alone and register a second mortgage behind it. Refinancing usually gives the lower rate but triggers a prepayment penalty; a second mortgage avoids the penalty but carries a higher rate and a lender fee. This calculator prices both paths — penalty, fees, legal costs — down to the net cash in your hand and the monthly cost of each.
Short answer
How much equity can I take out of my home?
Refinancing lets you borrow up to 80% of your home's appraised value, minus whatever you still owe — that difference is your available equity. A home equity line of credit is capped at 65% of value on the revolving portion, though it can be combined with a mortgage up to the same 80% total. Taking equity out means re-qualifying, so income, credit and the appraised value all set the real limit alongside the math.
Your property and mortgage
Variable penalties are three months' interest. Fixed penalties are the greater of three months' interest or the interest rate differential.
Most net cash your equity can release
$554,910
Path A wins: break the existing mortgage and replace it with a larger first.
Path A — break & replace
$554,910
- New first mortgage (80% LTV)
- $960,000
- Pays off current balance
- − $400,000
- Penalty estimate
- − $3,290
- Legal and appraisal
- − $1,800
- Monthly payment
- $5,004
Path B — add a second
$547,000
- Second mortgage (to 80% combined)
- $560,000
- No penalty
- − $0
- Lender/broker fee (2.0%)
- − $11,200
- Legal and appraisal
- − $1,800
- Monthly cost (both mortgages)
- $6,388
Estimates only. Penalty amounts depend on your lender's exact interest rate differential method, and available loan-to-value depends on the property, the location and the lender.
Results are estimates for general guidance only and do not constitute an offer of credit. Actual figures depend on lender policy, credit history, and verified documentation. Call (604) 780-5173 for exact numbers.
Key takeaways
- Refinancing a first mortgage is limited to 80% of the property's value in Canada; a second mortgage is measured against the same combined ceiling with most lenders.
- Breaking a fixed mortgage mid-term costs the greater of three months' interest or the interest rate differential; a variable is three months' interest.
- A second mortgage skips the penalty but typically prices several points higher and charges a lender or broker fee.
- The cheaper path flips with the size of your penalty: a large IRD often makes the second mortgage the better deal.
- Waiting for renewal removes the penalty completely — a switch funding on the maturity date costs nothing to break.
- Equity takeout funds are commonly used for renovations, debt consolidation, an investment property down payment or business capital.
Path A — break the mortgage and replace it
You take out a new first mortgage up to 80% of the property's value. It pays off the existing balance, the penalty and the legal costs, and the remainder is your cash. The whole balance carries the new first-mortgage rate, which is the lowest rate available on this list of options.
The catch is the penalty. On a fixed mortgage with a big gap between your contract rate and today's comparison rate, the interest rate differential can be tens of thousands of dollars, which eats directly into your net cash.
Path B — keep the first, add a second
A second mortgage sits behind the existing one. Your first mortgage is untouched, so there is no penalty and your low existing rate survives. The second is normally interest-only, priced by combined loan-to-value and the strength of the file, with a lender or broker fee taken from the advance.
Because only the new money carries the higher rate, a second can be cheaper overall than refinancing an entire low-rate mortgage at today's rates — especially when the amount you need is small relative to the balance.
How much equity can actually come out
Refinances are capped at 80% of appraised value. On a $1,200,000 home with a $400,000 balance, that puts the ceiling at $960,000 and leaves $560,000 of gross borrowing room before costs.
Second mortgages are usually available to the same 80% combined loan-to-value, and to 75% or lower in smaller markets. The property type, location and marketability all move the ceiling, which is placement work rather than a formula.
Choosing between them
Compare three numbers: net cash in hand, monthly cost, and how long you'll carry the debt. A second mortgage that costs more monthly can still win if you plan to clear it or roll it into the first at renewal in a year or two.
If your term matures within 120 days, the answer is usually to wait. A new mortgage funding on the maturity date pays no penalty at all, and the switch can be locked in ahead of time.
Worked example
Worked example: $1.2M home, $400,000 balance at 3.29% fixed
| 80% of value | $960,000 |
|---|---|
| Path A — new first mortgage | $960,000 |
| Path A — penalty estimate | ≈ $6,100 |
| Path A — net cash after legal | ≈ $552,100 |
| Path B — second mortgage to 80% combined | $560,000 |
| Path B — 2% fee and legal | ≈ $13,000 |
| Path B — net cash | ≈ $547,000 |
The two paths land within a few thousand dollars on cash, so the decision comes down to monthly cost: Path A puts the whole balance at today's rates, while Path B keeps the 3.29% first mortgage intact and charges the higher rate only on the new money.
Frequently asked questions
How much equity can I take out of my home in Canada?
Refinancing is limited to 80% of the property's appraised value. Subtract your current balance and the costs of the transaction to see what actually reaches your hands.
Is it better to refinance or take a second mortgage?
It depends on your penalty. A large interest rate differential on a low-rate fixed mortgage often makes a second mortgage cheaper, because your existing rate survives and only the new money is expensive.
What does an equity takeout cost?
Expect legal and appraisal costs on either path, a prepayment penalty when you break a mortgage mid-term, and a lender or broker fee of roughly 1% to 4% on a second mortgage.
Can I take equity out to buy a rental property?
Yes — using home equity for a down payment on an investment property is one of the most common reasons for a takeout, and interest on funds used to earn income may be deductible. Confirm treatment with your accountant.
Do I have to wait for renewal?
No, but renewing avoids the penalty entirely. If your maturity date is within 120 days, waiting is usually the cheapest option.
Will an equity takeout change my mortgage rate?
On a refinance, the whole balance moves to today's rate. With a second mortgage, your existing rate is untouched and only the new money is priced at the second-mortgage rate.
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