Home Refinancing Options As We Get Older

Should you refinance? What are the pros and cons? If you're up late at night thinking about this option, here are the key things to know...
Happy senior couple signing papers in their home with a sales person

To refinance or not to refinance. That is the question. As we get older, and particularly when unexpected events happen, many seniors turn to refinancing as a viable option. It certainly can create a cash infusion when needed. But, there are considerations, pros-and-cons, which could influence your decisions.

If you’re considering refinancing a mortgage, it helps to look at how this could impact your overall financial outlook.

For Refinancing
“Our house is our biggest asset. Shouldn’t we make the most of the cash, while we still can enjoy it?”

Right? It makes sense.

If you’ve got loads of equity in your house, you are sitting on a gold mine. You might easily qualify for refinancing. The money could be like a cash lifeline. This has many benefits such as:

  • Reducing mortgage payments
  • Reducing stress of budget
  • Refinancing at a lower rate or longer term
  • Paying rising health care and medical expenses
  • Investing in home improvements or repairs
  • Modifying homes for ease of living
  • Covering cost of long-term care
  • Going on a life-time dream vacation

Your financial advisor will have an opinion about the value and wisdom of this move. If you’re considering refinancing, it might be helpful to consult your financial advisor. Their objective lens could be useful to help you evaluate your options.

Against Refinancing
“After spending a lifetime paying down the mortgage, I can’t wrap my mind around increasing it.”

Sound familiar?

The fact is: many seniors share this perspective. It’s hard to do an about-face on a lifetime practice of reducing debt. If this sounds familiar, you may have a tough time supporting the move of refinancing.

On the side against refinancing, is the viewpoint of sustainability. While it may provide immediate relief, there are considerations for the long term. Lower payments sounds great right now. But, as time goes by, even lower payments may seem to be too high.

Refinancing could impact the overall cost of the mortgage—for better or worse.

It may seem odd to think about, yet many people are living longer. According to the Social Security Administration, a typical 65-year old who is retiring can expect to live another 20 years. One in three retirees will live to at least age 90. One in seven ill survive to at least age 95. You might want to do some number crunching with a calculator on life expectancy before you make your final decision.

While we all hope to live a long, quality life…these factors may influence your perspective on refinancing.

Keep exploring the issues with a clear, levelheaded approach. Rather than making a snap decision, talk things over with your loved one and key financial advisors.

Many mortgage experts suggest asking questions if you’re undecided about the best move.

Here are a few of the tough nuts to crack.

  • How long do you plan to stay in this home?
  • How many years are remaining on the mortgage?
  • What do you hope to achieve in refinancing?
  • What are your expected expenditures?
  • What do you plan on using the cash for?
  • What fees, taxes, and time is involved?
  • is your credit score?
  • What rate do you qualify for?
  • Are you planning on selling the house?
  • Are you planning on passing the house to your heirs?
  • Is your estate able to pay off any remaining mortgage balance?

Admittedly, these are not the easiest questions in the world. You’re likely to do some head-scratching and deep thinking to get to the best answers for your situation.

Use The Tactics of a Debate Team

You might think of this like an old-fashioned debate team. One side is ‘pro’ and the other side is ‘con.’ Hopefully, this is not turning into the equivalent of a fistfight with your partner or spouse.

If you’re finding yourself on opposite sides of the fence, you might want to do the classic trick. Fight for the other side. Play the devil’s advocate. Speak to all the key points for the side that’s opposite of your natural leanings. This may give you more compassion and insight into your loved one’s perspective.

While this may still not provide an ultimate solution, at least you’ll both be more tuned in to the emotions and logic of the opposite viewpoint. Not bad, right?

Assistance Club Summary

The Big Idea: Deciding when, how, and if to refinance is a highly personal decision.

There are many reasons both on the ‘pro’ and the ‘con’ side. By taking a detailed and clear-minded approach, you can determine the best course of action for your situation.

Be sure to talk with your financial advisor before finalizing your choice. Professional and objective input could be useful in revealing the wisest move.