A husband and wife review renovation plans together in their home. A husband and wife review renovation plans together in their home.

Let’s say you own a home and would like to do some renovations to increase the value of your property and improve your family’s quality of life. That could mean updating an aging kitchen, repairing some leaky plumbing or finishing a basement.

Now, let’s say that, like many Canadians, you don’t have a lot of cash to pay for the renovations. Maybe your money is tied up in investments you’d rather not touch, such as RESPs or RRSPs.

One option is to use the re-financing option in your mortgage – to industry experts, it’s a process known as a “re-fi”.

Free up funds to pay for renovations, tuition, high-cost debt and more

Essentially, a re-fi involves using the equity that you have accumulated in your property to free up cash. This cash could be used for just about anything, like home renovations or another big expense, such as a vehicle, post-secondary tuition or starting a new business. In some cases, people will use funds acquired through re-financing to pay off higher-cost debt, such as credit card debt.

The process of re-financing your home is relatively straightforward – in fact, the application is similar to that associated with getting a mortgage in the first place.

How much can you get?

Current regulations allow homeowners to borrow up to 80% of the appraised value of their home. However, you must also take into account how much of your mortgage has been paid off. Basically, the more money you’ve paid into your mortgage, the more cash you can acquire through a re-fi.

Let’s say your home is worth $450,000, which is roughly the value of the average home in Canada. And let’s assume that you’ve been paying down your mortgage for some time, so that you only have about $100,000 remaining.

In this scenario, 80% of the value of your home would be $360,000. Because you still have $100,000 left to pay, this means you can access about $260,000 in equity.*

London Life’s Re-Advance program

It’s worth keeping in mind that, depending on who you work with to secure your re-fi, fees could reduce the money available to you. With London Life’s Re-Advance program, you may be able to avoid some of these costs (such as some legal fees).

To learn more about the re-financing option, speak to a financial security advisor with Freedom 55 Financial. They can connect you with a London Life mortgage planning specialist, who can provide you information about the Re-Advance program and help you determine if a re-fi is right for you.

* To learn more about the federal government’s rules for re-financing a home, see the article “Borrowing against home equity,” Government of Canada, August 2017.

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