- You can generally borrow up to 80% of your home’s value when refinancing.
- Breaking a fixed-rate mortgage early can mean a large penalty, so do the math first.
- Blend-and-extend or a HELOC may beat a full refinance.
1. Know why you’re refinancing
Common reasons are consolidating high-interest debt, funding a renovation, accessing equity for an investment or lowering your payment. Your goal shapes which option is best, and whether refinancing is the right tool at all.
2. Understand the 80% limit
For a standard refinance, lenders will generally lend up to 80% of your home’s appraised value, minus what you already owe. If your home is worth $800,000 and you owe $450,000, you could access up to about $190,000.
3. Calculate your prepayment penalty
Breaking a variable-rate mortgage typically costs three months’ interest. Breaking a fixed rate usually costs the greater of three months’ interest or the interest rate differential (IRD), which can be thousands of dollars. Ask your lender for an exact payout figure.
4. Compare the alternatives
A blend-and-extend lets you add funds at a blended rate with your current lender, often without a full penalty. A home equity line of credit (HELOC) gives flexible access to equity. Waiting until renewal avoids penalties entirely.
5. Add up the full cost
Beyond the penalty, budget for legal fees, an appraisal and possibly a discharge fee. Refinancing makes sense when the interest you save, or the value of what you’re funding, clearly exceeds these costs.
This guide is general information, not financial advice. Rules and programs change; an independent, licensed mortgage agent can confirm what applies to you.