Have you been looking at current interest rates with a hint of jealousy, wishing your monthly payments were lower? Do you want to lock in the best mortgage rates in Calgary that you can find? Are you approaching retirement, and you want to bring down your monthly payments so that you can enjoy more of your money?
Whatever your reason is for looking into mortgage refinancing, remember that spending even a few moments with our mortgage specialists could open the door to solutions that could save you thousands of dollars. We’ll show you all the best options and how much money you could be saving when refinancing a mortgage in Canada.
Retirement is a time to enjoy your life and to put your hard-earned savings to good use. Whether or not you’ve reached all of your financial goals yet, we’re here to help you optimize your finances and to get the most out of your money so that you can spend more time doing what you love to do and less time dealing with big banks.
Refinancing a Mortgage in Canada: Here’s What You Need to Know
The first thing to remember is that the bank doesn’t always have your back, especially once they’re already sold you a mortgage. Our team of mortgage experts in Canada knows exactly how to deal with accredited lenders to ensure that you’re getting the best rates when you refinance. Don’t assume that your bank is ever going to do you any favours or that they’re even looking out for your best interest.
When you refinance your mortgage with us, we go to work for you immediately to lock in the best rates for you, allowing you to hold onto more of your money at the end of each month. The money you save can go towards your investments to grow your wealth, or it can go towards your mortgage so that you can own your home sooner.
You can refinance at the end of your mortgage term, at which point you’re free to shop around and choose the option that suits you the best.
You can also refinance during your mortgage term, for example, if there’s a very tempting interest rate that you want to lock in for the sake of lowering your payments and saving money. Another reason one might refinance during their term is if they want to access some equity from their home for an important purchase, pay down other debts, or make necessary repairs or upgrades to the home.
4 Fast Facts about Mortgage Refinancing in Calgary
Here are some things to keep in mind, including some of the pros and cons of refinancing your mortgage.
4. Timing Is Important
If you’re switching from one mortgage provider to another and you aren’t at the end of your term, there are several penalties and fees that you may end up facing. We can help you look over the numbers to find out how advantageous it could be to refinance, even when accounting for various fees or penalties.
3. Lower Monthly Payments
If it’s a priority to have lower monthly payments while still paying off your mortgage in the same time frame, this is possible when you refinance at a lower interest rate. In some cases, it could be worth certain penalties or fees to do this sooner.
2. Shorter Mortgage Term
Some homeowners will choose to refinance to obtain a shorter term. They may start with a 30-year mortgage, make their payments, then end up with a larger income later in their career. As such, they may choose to refinance to a 15-year mortgage, saving a lot of money on interest payments along the way but spending more on monthly payments in the meantime.
1. Changing the Type of Mortgage
If a homeowner has an adjustable-rate mortgage and wants something more predictable, they could opt for a fixed-rate mortgage. Variable-rate mortgages tend to offer more savings in the long run, but they aren’t predictable. At different stages in life, one’s risk tolerance can vary, making it beneficial to switch from one type of mortgage to another.
With a product like Manulife One, you’re able to take advantage of both types of mortgages, and you have much more freedom to put your equity to work towards other investments without having to refinance or pay any penalties.
What is a Mortgage for Retirees?
We’ve been asked if someone who is 65 can still qualify for a 30-year mortgage. It’s not about the age of the person taking out the mortgage, but rather their ability to repay it. If you’re retired, and you’re living off of savings, it will be trickier to get a mortgage compared to somebody who is retired and getting substantial pension income or monthly income from their investments, but it’s based on income – not age. Income plays a big role in qualifying for a mortgage, whether you’re retired or still working.
The Pros and Cons of Refinancing Your Mortgage in Retirement
As your career comes to an end and it’s now time to fully enjoy what you’ve worked for, there are still a few important financial decisions to make, and some of them involve your mortgage. Should you refinance your mortgage when you’re retiring, or should you stick to what you have? Here are some pros and cons of refinancing your mortgage when you retire.
These are just generalities, but we would be happy to discuss this with you during a free consultation. This will allow us to offer guidance based on your unique financial situation rather than painting with broad strokes.
The Pros of Refinancing Your Mortgage
- Rates: When a homeowner can get a better interest rate by refinancing their mortgage, that is usually the strongest argument in favour of doing so.
Even a minor improvement in your interest rate can go on to save you a lot of money over time while freeing up more of your monthly income for things like investing, putting towards an extra mortgage payment, or just spending it on having fun with your friends and family.
Lower monthly payments on a mortgage can be useful when you’re retired and living on a fixed income, as this is when people tend to shift from saving to spending.
- Terms: This is an opportunity to change the terms of your mortgage, too, in case someone has come along that makes more sense for you in your current financial situation. Some people will choose to change their 30-year mortgage to a 15 year, especially if significantly lower interest rates can help offset the higher monthly payments.
- Cashing out equity: Some homeowners who have more equity in their home (which is very common as people approach the age of retirement) will opt to refinance their mortgage to cash out some of that equity. They’ll receive access to a lump sum of cash in return for extending their mortgage longer and giving up some equity in the property.
This money can be used for helping your kids pay for their school, for making upgrades you’ve always dreamed of to the property, to pay off higher-interest debts like credit cards, to start a business or invest in something, and more. Make sure your pension or other monthly income can cover your monthly payments!
- Paying down debts: As mentioned, paying down larger debts by refinancing your mortgage can be a very useful tool if you’re disciplined enough to make sure those debts don’t creep up again. If you have a credit card at 15% or 20% interest, and you can use the equity in your home by refinancing your mortgage at 3% or 4% to pay off that credit card debt, you’ll be saving a lot of money.
The Cons of Refinancing Your Mortgage
There are some common traps you can fall into or challenges you may face if you aren’t careful when you refinance your mortgage.
- Do the math: Sometimes, the rate you have will be close enough to the rate that you’ll be able to lock in, to a point where it’s not worthwhile to refinance yet, especially if there isn’t much time left on your mortgage term. This is something we can help you with.
- Fees: If you’re thinking of refinancing your mortgage before your current term is up, make sure there’s enough of a swing in the interest rate to make it worthwhile (unless the goal is to cash out a portion of your equity, in which case there’s a specific reason for refinancing other than getting a better rate.)
You’ll have to pay fees when you refinance your mortgage early, especially if you’re moving to a different lender, and we can help you determine if that’s worthwhile or not, depending on what your specific financial goals are.
- Requires discipline: This is a loan against the equity you have in your home, so if you’re not able to pay it back, your house is on the line. While it can be diligent to use home equity to pay off more expensive credit cards debts, if you don’t change the spending habits that helped you rack up those credit card debts in the first place, you’ll just end up with more maxed cards and a much longer mortgage to deal with. It can be a very useful tool, as long as you use it wisely.
Practical Advice for Retiring With a Mortgage
With mortgages lasting for decades, and people trending towards buying houses a bit later in life nowadays, we’re moving in a direction where more and more people could be carrying mortgages into their retirements. This is especially true for anyone who retires early at a younger age, as well. However, someone retiring young will probably have ample finances to take care of their mortgage.
As such, it’s worth thinking more about how to manage a mortgage in retirement.
Questions and Answers
Can you get a mortgage when you’re retired?
What if you don’t have a mortgage yet, but you decide to purchase a home later in life when you’re already retired? Are you able to get a mortgage after retirement? Yes, you are. Income from your pension can be used to meet the income requirements for your mortgage. If you don’t have any income and you’re living off of savings, it could be much more difficult to get approved for a mortgage, though.
Banks can’t discriminate against people based on their age, so they cannot give worse terms to people simply for being retired, but things like income can still play into a bank’s decision about whether or not to write a mortgage.
Should I refinance my mortgage?
This is a question that varies for each individual. Contact us for a consultation, and we’ll ask you a few questions to help determine whether or not a refinance is a good idea in your current situation while considering the current rates and the terms of your existing mortgage.
Ready To Retire? Let’s Talk About Refinancing Your Mortgage
In addition to using our calculations to determine the benefits of refinancing your mortgage, we can also discuss several different ways that you could be optimizing your savings and your finances and making sure your money continues to work for you, even though you’re done working.
Just because you’re retired, this doesn’t mean that you have to lose all of your ambitions or that you have to stop growing your wealth. You’ll have a lot more time on your hands to do the things you love, but just because you’re retired, this doesn’t mean you need to watch your savings and wealth slowly dwindle. Let’s talk about how we can help you find the perfect mortgage product to fit your plans and goals.