Finance a Project by Refinancing Your Mortgage
Article revised on 27 July 2017
As someone who has owned a house for several years, have you ever dreamed of adding a solarium to your home? Perhaps you’ve thought about renovating your kitchen or washroom, or had your eye on a cottage for some time now? Did you ever think you could make those dreams a reality by refinancing your mortgage?
Over the last few years, many homeowners have seen a rapid increase in property values while still making regular mortgage payments. Did you know you can borrow up to 80% of the market value of your residence?
There are many benefits to refinancing your mortgage. Your interest rates are more attractive than those for personal loans or credit cards and you would only have one payment to make a month. Therefore, the cost of making your dream projects come true would be lower.
How can refinancing your mortgage be useful?
Ideally, refinancing your mortgage would be used to increase the value of your assets. If you want to make significant renovations to your home or buy a secondary residence, it could be the right solution. You would need to make a substantial investment to renovate your kitchen and bathroom, but doing so would also significantly increase the value of your home.
What’s more, refinancing your mortgage can provide the financial leverage you need to prepare for retirement. In fact, you can use the money to invest in an RRSP or purchase your own small piece of land where you could live out your retirement years in peace and quiet.
But always bear in mind your debt ratio. The amount used to pay for your mortgage, property taxes and various other expenses related to your home (electricity, 50% of condo fees, etc.) should never surpass 32% of your gross annual income. If you also add the payment of your other debts, the total amount should not exceed 40% of your income. That’s how you keep your head above water.
Refinancing your mortgage is another option you should consider to help you carry out a project. But always exercise caution when you make these types of decisions.
Your financial security advisor can be your most precious ally and provide the best advice in these types of situations. Feel free to contact him or her!
Need more information?
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