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If you’re 55+, own your home and have manageable debts, you may be able to unlock the value of your own home as you age. You’ve likely been paying into your mortgage for decades. Use that to your advantage and learn more about financing options for seniors. Whether you’re looking to pursue renovations or have to keep up with property maintenance, having access to your home’s equity can give you more financial freedom.
Types Of Mortgage Financing For Seniors
Despite what some Canadians may think, you can still qualify for housing loans as you age. In fact, it’s illegal for lenders to discriminate based on age (senior) or status (pensioner). As with any other applicants, lenders will take a look at your income, assets and credit score to get a better idea of how you manage money. As part of this conversation, you’ll likely find yourself presented with a few options when it comes to your mortgage:
If you have the ability to cover monthly mortgage payments, refinancing is typically the easiest option and will likely get you the best interest rate. This process would allow you to unlock 80% of your home’s value for borrowing and then give you the option of repaying it in monthly installments over the course of 25 – 30 years. You will encounter fees with this option, but there are a few different choices you’ll have to pursue (breaking your mortgage contract, opting for a blended mortgage or taking out a home equity line of credit) should you decide to take the path toward refinancing.
Home Equity Line Of Credit
Also known as a HELOC, this option will give you the flexibility to borrow up to 65% of your home’s value, as much or as little money as you need and your interest rate will be variable. You’ll have payment flexibility, you can pay back what you’ve withdrawn to draw it again and you only pay interest on the amount drawn. It’s important to note, however, that it may take more time and discipline to pay this loan back as the minimum monthly payments are just the interest on what you’ve borrowed.
Pursuing a reverse mortgage will undoubtedly be more complex than the other options and is typically not the best choice when compared to refinancing or a Home Equity Line Of Credit. This option will allow you to borrow up to 55% of your home’s value as a lump sum or in fixed monthly payments. Most commonly, the full loan and accumulated interest are only paid off once you pass away or sell your home. As this is often a more expensive endeavour, it’s advisable to seek out legal advice to learn more about how the process works and how it compares to your other choices.
Buying A New Home
Since you’ve lived much of your life paying off debts and loans already, lenders are more likely to see you as a responsible borrower. As a result, you could also consider selling your current home and purchasing something new that better suits your aging needs; whether that’s being in closer proximity to the amenities you need or perhaps downsizing to something more manageable so you can spend less time cutting the lawn, and more time relaxing.
Deciding What Option Is Best For You
Each option you’re presented with will bring its own set of pros and cons. It’s important to remember that everyone has a unique situation and a specific set of needs so there is no right or wrong answer when it comes to deciding which option is best for YOU.
If you’re unsure how to begin narrowing down your choices, consider asking yourself these questions:
- Would it be best to receive the loan as one lump sum or in smaller monthly payments?
- How will your choice impact your ability to sell your home in the future should you decide to move in that direction after?
- How does this option affect your spouse or children?
- If you decide to pay off the loan early, will you be penalized for that?
- What will happen if the amount of money you owe is more than the value of your house when it comes time to pay the loan back?
- Do you have the option for a trial period where you can cancel the agreement if you change your mind?
As a senior, there are plenty of options available for unlocking the value of your current home. Understanding how each one differs and what value it may add to your personal situation, can help you make a selection that’s right for you. The first step is learning more and assessing your current financial situation. When you’re ready to talk, reach out to our team to learn more about mortgage financing options for seniors.