Should Real Estate Investors Refinance Their Properties Or Pay Off Their Mortgages?
- Wayne Hillier
- Aug 25
- 4 min read
By Wayne Hillier, Real Estate Investing Masters
August 25, 2025 | Edmonton, AB
As real estate investors, one of the biggest decisions we face is whether to refinance a property and reinvest the equity or to focus on paying down the mortgage. I’ve thought about this a lot over the years, both in my own portfolio and while coaching hundreds of investors across Canada. The truth is, there isn’t a single right answer, but there are clear patterns about when refinancing makes sense and when paying down debt is the smarter move.
Why Refinancing Can Be a Powerful Tool
When you refinance, you’re essentially putting your equity to work. Properties naturally build equity through appreciation and mortgage paydown, but if that equity just sits there, it’s not creating more wealth for you. By refinancing, you can access that capital and use it to buy additional properties, expand your portfolio, or fund major improvements.
Here’s the key though: I never recommend refinancing without running what I call the Cashflow Test. After you pull the equity out, does the property still generate strong, positive monthly cash flow? If it does, then refinancing can accelerate your growth without putting you at unnecessary risk.
This strategy works especially well in the early years of investing, when growth and scaling are your top priorities. It also has a tax advantage: money from a refinance isn’t taxable the way selling a property would be.
Why Paying Off Mortgages Brings Stability
On the other hand, paying off mortgages provides something that refinancing never will...absolute peace of mind. Every time you eliminate a mortgage, your monthly cash flow jumps significantly. Imagine three or four properties completely debt-free. The income those properties generate each month can replace your salary, fund your retirement, or give you the security of knowing that no matter what happens in the market, you’ll always be financially stable.
This approach is especially powerful if you’re later in your investing career, or if you simply value stability and sleep better at night without debt hanging over you. I’ve seen many investors build portfolios through refinancing in their early years, only to shift toward paying down debt once they reach a certain level of comfort.
The Factors That Should Guide You
Here’s how I break it down when helping investors make this decision:
Stage of Life – Are you in a growth phase, a stability phase, or preparing for retirement?
Market Conditions – Are interest rates high? Are rents strong? These factors matter.
Stress Testing – Could your portfolio handle vacancies or rate increases if you refinance?
Risk Tolerance – Are you more growth-minded, or security-driven?
Opportunity Cost – If you pull out equity, do you have a clear, profitable plan for it?
A Hybrid Approach
In reality, many investors find balance by doing both. They refinance early in their journey to grow their portfolios, then later start paying down mortgages to secure their financial freedom. Some use a snowball strategy, aggressively paying off one property at a time while still leveraging others for growth.
Personally, I believe the best investors are the ones who know exactly what they want their portfolio to do for them. If your goal is rapid growth, refinancing (ensuring it passes the Cashflow Test) is a great tool. If your goal is peace of mind and financial freedom, paying off mortgages can get you there. And for many, a hybrid path is the most realistic.
Wayne’s Final Thoughts
At the end of the day, this decision isn’t just about numbers, it’s about aligning your strategy with your long-term goals. Both refinancing and paying down mortgages can work beautifully, provided you follow the right fundamentals. That’s why I always emphasize the importance of stress testing your portfolio with the Cashflow Test.
The cashflow test ensures that no matter which path you choose, reinvesting equity through refinancing or paying down debt, you’re left with sufficient cash flow to weather any potential storms. It’s the difference between an investor who gets caught off guard and one who builds a resilient, storm-proof portfolio.
I dive deeper into this concept in my bestselling book, The 5% Rule™: A Real Estate Cash Flow Test for Canadian Investors. This book has already helped hundreds of Canadians build strong, sustainable portfolios that can stand up to changing markets, rising interest rates, and unexpected challenges.
Get your copy here → The 5% Rule™: A Real Estate Cash Flow Test for Canadian Investors
If you use the cashflow test as your guide, you won’t go wrong. Whether your strategy is to grow aggressively or to build long-term stability, you’ll know with confidence that your portfolio can carry you through.
Listen to Today’s Episode:
Real Estate Investing Morning Show – Hosted by Wayne & Gabby Hillier
About the Author
Wayne Hillier is one of Canada’s trusted experts in real estate investing education, specializing in Alberta’s thriving markets. Based in Edmonton, Wayne has over a decade of experience building a high-performing rental portfolio and coaching investors to achieve strong cash flow, sustainable wealth, and creative financing success. As co-founder of Real Estate Investing Masters, Wayne is a respected real estate investing coach and mentor, dedicated to helping Canadian investors confidently scale their portfolios. He is also the host of The Real Estate Investing Morning Show, Canada’s #1 daily podcast.
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