Can You Refinance with a Home Equity Loan?

Refinance with a Home Equity LoanRefinancing vs. Home Equity Loans

Your house is more than just a place to live and a great long-term investment. It can also be a great source of money should you need it. Those who have lived in their homes for a number of years have probably come across the terms “refinancing” and “home equity loans”; while they’re often used interchangeably, they’re actually vastly different. What they do have in common is that they relate to accessing money using your home.

What’s the difference between refinancing and a home equity loan? When you refinance, you are simply replacing an old mortgage with a new one. Home equity loans, on the other hand, allow you to access the equity you’ve built up in your property. A home equity loan does not replace your mortgage. If you take out a home equity loan, you still need to make payments on the original mortgage.

Home Equity Loans

Homeowners who need to access money to renovate their home, buy additional property, invest, buy a car, help pay for university tuition, etc. might want to consider a home equity loan. Because the interest rates are lower and the money is secured against the property, it’s less costly than taking out a traditional loan.

One of the biggest differences between a home equity loan and refinancing a mortgage is that the closing costs are a lot higher when you refinance a mortgage. That being said, interest rates are higher for home equity loans.

Those who do not expect to live in their home for a long period of time might want to look into getting a home equity loan. That’s because you’ll pay the loan off when you sell your property and won’t be stuck with higher interest rates for very long. Since you’re not refinancing the original mortgage, you’ll be able to take advantage of reduced closing costs.

What’s the downside? Well, because a home equity loan is secured against your property, if you default on your loan, the lender will come after your house.

There are two types of home equity loans: a home equity loan and home equity line of credit (HELOC). They sound alike but are very different. A home equity loan is similar to a first mortgage (and is often called a second mortgage): you get an upfront payment that is repaid over a fixed period of time. A HELOC, on the other hand, is a revolving line of credit.


When you refinance, you get a new lender to pay off your old mortgage in exchange for a new one—ideally at a lower rate. If you have high interest debt, it can make a lot of sense to refinance a mortgage as the interest rates with refinancing are significantly lower than higher interest rate credit cards and loans. Consolidating these debts into a mortgage at a lower interest rate will also help save money.

If you intend to stay in your home for years to come, it might make more sense to refinance the property. If you get a loan with lower interest rates or increase the amortization period, you can reduce the monthly payments. You should also be able to recover any closing costs too.

Refinancing a Home Equity Loan

If you’ve got high-interest debt or other costs, you may want to consider rolling the home equity loan into your mortgage. While many homeowners refinance a home equity loan to unlock the equity in their home, it doesn’t mean you have to take money out of your home. You might want to refinance simply because you can find better interest rates or terms.

Or maybe you want to refinance a home equity loan to add a line of credit. For example, if the original mortgage you received was based on bad credit and your credit has since improved, refinancing a home equity loan can save you a lot of money.

Thanks to the strong appreciation in housing prices across the country—especially in Toronto, the Greater Toronto Area, and Golden Horseshoe—most homeowners have accumulated a huge amount of equity in their homes.

When it comes to refinancing a home equity loan, it’s important to shop around and see what different banks, mortgage companies, and private lenders are offering. Home equity rates will vary, and some lenders will be more suited to your needs than others. Some specialize in helping those who have bad credit, declared bankruptcy, or are self-employed.

There are a lot of different financial products out there, and homeowners need to be careful and should know exactly what they’re getting into when tapping the equity in their homes.—Helping Canadians Consolidate Debt

Whether you’re planning to make major renovations to your home, important purchase, investment, or consolidate high interest rate debt, the trusted mortgage professionals at can help you refinance your home equity loan.

We’ll evaluate your currency financial position and help you determine which loan product is best suited to your needs: refinancing, home equity loan, or HELOC. With access to hundreds of different lenders, we’ll find you the right home equity loan.

To find out what your options are, contact today. Or apply online and a lending specialist will help you set up an appointment for a free personal consultation at your earliest convenience.

Bob Aggarwal

Mr. Aggarwal was one of the original founders of, one of the largest volume Mortgage Brokerage houses in Canada. Mr. Aggarwal has over 12 years of experience in Brokerage and Lending in the small and medium business sector, as well as experience and expertise in the residential housing market. Since the inception of, Mr. Aggarwal has been instrumental in developing the operating platforms, and policies and procedures which have guided the organization to date.


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