Refinancing in your golden years

Mortgage refinancing, home equity loans, home equity lines of credit, second mortgages, secured loans… what's the difference? These days, there are a variety of ways that Canadian homeowners can 'free up' some of the equity they have built up in their existing home, allowing them to access cash needed to finance a major renovation, pay off debt, purchase a new vehicle, etc. 

There are a few things to consider when deciding if refinancing is the right option for you so it's a good time to speak with a mortgage professional to weigh the choices. 

Refinancing is always an option for homeowners enjoying the golden years in life, those over 55 who own their own home, don't have any major debt and are looking for extra money to help with daily expenses, updating their home to meet their needs or any number of personal reasons. 

Here are brief descriptions of some of the more popular options available:

Refinancing: Most Canadian lenders will allow homeowners to borrow up to 80 percent of the appraised value of the home. Often providing the best interest rate, refinancing allows borrowers to pay back the money over an extended period of time, even up to 25 years. Keep in the mind that the refinanced portion of your mortgage may have a different interest rate than the original. 

Home Equity Line of Credit: A home equity line of credit (HELOC) is similar to a regular line of credit, allowing borrowers to access money on their own timeline, up to the credit limit. You can pay it back and borrow again. Homeowners will have to apply for a home equity line of credit to find out whether they qualify. A lender will allow homeowners to borrow up to 65 percent of their home's appraised value. 

Reverse mortgage: A reverse mortgage allows a homeowners borrow up to 55 percent of the value of their home in a lump sum or fixed monthly payments. In most cases, you will not have to pay the principal and accumulated interest back until you sell your home or pass away. The costs associated with a reverse mortgage are higher and the conditions around the contract are more complex, so be sure to seek the advice of a professional. 

For more information on refinancing, visit the Canadian Mortgage and Housing Corporation at https://www.cmhc-schl.gc.ca.