Your home may be the biggest investment you’ll ever make. That means you want to be smart with your mortgage. Although we can’t say for sure what mortgage rates will do – or how the housing market will shift – we have compiled our top tips for the year ahead; sensible strategies for today’s homebuyers and owners.
Variables are back. Several lenders are offering strong “prime minus” rates that could save you thousands in interest. And the Bank of Canada is still holding their key “overnight rate” very steady and very low… making variable-rate mortgages a sensible option right now. Fixed versus variable has always been a challenging mortgage decision. Note variable rate mortgages attract penalties as do all closed mortgages, and such penalty is usually 3 months’ interest to prepay if you cannot port or transfer the mortgage to new property.
Don’t forget to approach your lender on your mortgage renewal. Don’t miss out on an opportunity to save thousands on your mortgage and you can approach the lender even before maturity to complete early renewal and fix rates and/or complete a fixed rate combined with a line of credit or variable rate combined with line of credit.
Pay your existing mortgage, debts, utilities, phone bill on time! Paying your mortgage and other debts on time has always been the most important credit habit. Equifax recently started to include phone companies on credit bureau reports – so your lender can see if you have any delinquencies with your phone bills. Look like a good borrower.
Keep other good credit habits. Don’t let your credit accounts exceed 30 per cent of your limit. Don’t cancel an old credit card without getting advice. And don’t sign up for store cards: they often have exorbitant interest rates, and the application triggers a credit inquiry.
Mortgage versus total debt. Consider consolidating high-interest debt e.g. credit cards and other loans outside your mortgage that you won’t be able to pay off in the next few months. Think about rolling that debt into a new low-rate mortgage. This one, smart strategy could save you thousands… and boost your monthly cash flow. Note that the Federal Government has clamped down on refinance loan to value ratios depending on the value of your house by way of appraisals, i.e. 65% so it is important to consolidate your debts if you can come within this loan to value ratio or obtain second mortgage financing preferably from a financial institution or from private lenders for l or 2 years to consolidate your debts, save interest and then go back and refinance with new first mortgage lender at first mortgage rates to cover all debts and mortgages i.e. Debt Consolidation.
Don’t let anyone tell you prepayment penalties are “all the same”. They’re not. If you ever need to get out of your mortgage early, the right mortgage could save you thousands. Not all lenders calculate penalties the same way, and the differences can be substantial. It helps to know which lenders have the most fair prepayment penalties. Penalties can be 3 months’ interest or interest rate differential but for each calculation if you prepay the maximum permitted under your mortgage terms, i.e. l0% or l5% of the original principal if permitted at any time during the year, then the penalty will be calculated on the lower principal balance. You can discuss with our lawyers how to make such savings on prepayment.
If one of you wants to keep the marital home. If you are going through a separation or divorce and one of you wants to keep the marital home, there are many favorable mortgage options, including a mortgage to 95 per cent. Your home can be the asset that gives you both a fresh start! But for Family Law issues and settlement please consult the Family Law Specialists at Dale, Streiman Law LLP.
A paydown will pay it forward. Take every opportunity to beat down your mortgage principal using any prepayment privileges! Use tax refunds, bonuses, whatever. Or switch to weekly or bi-weekly payments. Every dollar you pay down on principal means every future payment goes further.
Thinking renovation? We see what you see. Your renovation or home improvement will add value to your home. That’s why we have a special “Refinance Plus Improvements” mortgage that lets you refinance up to a certain percentage but you have to qualify and either first mortgage refinance or even second mortgage may be the solution to home renovations for improvement to your home and its value.
