Why Consider Seniors’ Refinance Programs?
Whether you’ve owned your home for decades and are retired or are simply planning for the future, it’s good to learn about the financing options available to seniors in Canada. Among possible choices, including CHIP reverse mortgages and withdrawing from RRSPs, refinancing can present various ways to help you maximize your opportunities during retirement. Today, let’s explore this subject in more detail.
Refinancing Options
There are different methods available for refinancing a home. Let’s explore two of them now:
Cash-Out Refinance
With a cash-out refinance program, you as the borrower submit a special request to the lender. This request is for permission to pay off any or all outstanding debts by adding a large, borrowed sum to your mortgage. This is often done for reasons such as high credit card interest rates compared to that of a mortgage or refinancing, especially if you’re up for renewal and can get even lower rates. Timing it this way helps to avoid prepayment penalty fees as well.
If you decide to go with the cash-out approach as a senior, be mindful of how much you plan on borrowing from the lender, as this will add to your mortgage, not reduce it. The maximum cash-out amount is 80% of your home equity. Cash-out refinancing can be done if you are 55 years or older, and it’s a great choice when the property’s value has increased considerably.
Rate and Term Refinance
A rate and term refinance program works a little differently. Rather than siphon equity from your home and increase the mortgage amount, you can leverage lower interest rates if they have dropped. In the event of a considerable drop in rates, you may be able to pay off your current mortgage much sooner without having to touch your equity.
Uses of Refinancing
Next, let’s go over some of the potential benefits of refinancing as a senior, specifically:
Renovations
The Canadian Mortgage and Housing Corporation (CMHC) lists renovation refinance options as one of several optimal approaches for covering the costs of work done on your home. Cash-out refinancing can be especially handy for performing major additions, gutting and overhauling interiors, and other major renovations that cost considerable money. In addition, there’s another perk to consider: the improvements made to your home will increase its value further!
Travel
Many seniors long to make the most of their retirement years, which means not having to settle for local walks in the neighbourhood. Many yearn to escape to the tropics, enjoy a pampered experience, explore the Far East, or soak up cultures from around the world. Refinancing through a cash-out option means having a large lump sum readily available for cruises, flights, accommodations, excursions, incredible meals abroad, and more. Rate and term refinancing make travel dreams a reality sooner than later, thanks to potentially helping you pay off your mortgage earlier with better rates.
Important Expenses (and the Occasional Treat)
There’s nothing wrong with treating yourself, especially once you’re retired and worked for decades to get to this point. Whether you wish to settle into a new leather lounge chair, upgrade that old Camry to your dream car or otherwise, refinancing may be able to make these nice-to-haves more feasible. Of course, you may prefer to cover the costs of your grandchild’s tuition, get the backyard spruced up for fun family visits in the sun, or make upgrades to your bathroom and other rooms throughout your home, so it is wheelchair accessible.
If you’re unsure whether refinancing is a good idea based on your present financial circumstances and needs, we’re happy to help here at the Seniors’ Lending Centre. Reach out to our friendly team of experts today!
