What happens if you’re over the age of 55 and you’re interested in a mortgage? There are financing options and being informed about them before making any final decisions is a step in the right direction.
For instance, let’s say you own a home, and you don’t have any major debts. In this set of circumstances, you may be eligible for the equity in your home without the need to either sell it or move out. There are various types of mortgage financing options available to you in Canada, and one of them is the refinancing one.
What exactly is refinancing and why is it beneficial to me?
Firstly, refinancing can be a viable option for people over 55 in Canada. It can be a reasonable route to go if, for example, you already have the resources required to cover mortgage payments on a monthly basis. Refinancing can also let you borrow up to 80% of the value of your home, according to the Canada Mortgage and Housing Corporation (CMHC).
What about a reverse mortgage?
There is the reverse mortgage option to think about as well. This option encompasses a more complex contract and allows you to borrow up to 55% of the value of your home either as fixed monthly payments or all at once.
Typically, you repay the accumulated interest and the loan when you either pass away or decide to sell your home. This option can be more expensive than the aforementioned one, however, and having an in-depth conversation with trusted mortgage and financial advisors can aid in helping you decide whether or not this is the most suitable for you.
How can HELOC be advantageous?
There is also the home equity line of credit HELOC to consider as a mortgage financing option. The HELOC choice offers some flexibility in terms of borrowing financial sums that are up to 65% of the value of your home. In terms of the monthly payments, they involve the interest on the amount that gets borrowed, which can result in taking more time to pay back the loan.
What should I think about before making a final decision?
As with many mortgage financing decisions, the choice you make is heavily dependent on your unique set of circumstances. Think about your needs, your goals, as well as the policies and requirements outlined by different mortgage lenders.
There are several useful questions that you can ask a lender and yourself. For instance, are you comfortable with getting a single loan that is a lump sum payment? Another question to ask would be about the future of your home should you wish to sell it down the line.
Don’t forget to consider the other parties that may be affected by your decision. If you have children or you’re with a partner, then how would the chosen mortgage financing option affect them in the present and in the long run?
Moreover, speak with a professional financial advisor or mortgage expert about what would happen if there would be any penalties should you choose to pay your loan off earlier than the expected date.