If you’re a senior and considering purchasing a new home or refinancing the one you have, the prospect of such an investment might feel overwhelming. However, at Seniors’ Lending Centre, we know the ins and outs of this process, and it’s actually not a difficult one to complete! There are a few requirements and even opportunities to consider, but our dedicated team is happy to help you make a sound decision.
Today, using our knowledge of mortgages for seniors in Canada, let’s walk you through how to buy a home or refinance in retirement.
If you wish to obtain approval for a traditional mortgage through the bank, you can do so. However, going this route means you need to follow the same lending guidelines as with younger, employed individuals, so it may sometimes be more difficult to get a decent pre- amount – usually if your income is insufficient. Despite this, if your pension can cover the costs, you likely won’t be turned down, especially if you have enough savings put aside for a large down-payment. There is no age limit associated with a mortgage pre-approval, and it is illegal for any bank to discriminate against senior borrowers.
Canadian Home Buyers’ Plan (Withdrawing from RRSPs)
Many mortgages for seniors in Canada are approved using funds the borrower withdraws from the RRSPs they have contributed over time – up to $35,000 and completely tax-free. This is a great way to increase your down-payment and drive down the total interest, but you need to repay all the RRSP funds you withdraw before reaching age 71. This is known as the Home Buyers’ Plan (HBP). Learn more about it and how to withdraw these funds.
Refinancing (Borrowing from Home Equity)
Interested in making the most of your retirement? Those dream trips, classic cars and new adventures are calling, and refinancing your home creates some cash flow to make these opportunities happen. As stated by the Canadian Mortgage and Housing Corporation (CMHC), you can borrow against your home equity if you’re over age 55 with no significant debt. You don’t need to sell your property or move to a lower-cost home in order to obtain it. Refinancing in particular is an easy option, allowing you to borrow up to 80% of your home’s total value. Those funds are then made available to you, ideal for enjoying your golden years to the fullest, with manageable monthly installments between 25 and 30 years. Learn more about home equity loans in Canada.
CHIP Reverse Mortgages
An alternative to refinancing is applying through the Canadian Home Income Plan, otherwise known as CHIP. Available exclusively to seniors aged 55 or older, borrowers on this plan don’t have to undergo credit checks or meet minimum income requirements. Along with that, there are no monthly repayments to worry about – you can pay as little or as much as you can afford – so it’s one of the best options when looking at reverse mortgages for seniors in Canada! Note that the amount provided depends on the location of your property, its value and your approximate age, among other factors. See all the important details regarding CHIP, or download our free guide.
This is just the tip of the iceberg when it comes to refinancing and mortgages for seniors in Canada – our team can clarify all the important details and even present alternative options! To get started, reach out to us at Seniors’ Lending Centre today for a free, no-obligation quote.
Written by Rebecca Awram
Mortgage Broker at Seniors' Lending Centre