Nov 30, 2013 / 5:00 am
When was the last time you thought about your mortgage? Most people take out a mortgage with their bank for five years and then forget about it. When you took out that mortgage did anyone discuss other options for you such as a 10 year term to provide you with more stability when rates rise? Most of the time I think mortgage holders don’t know what questions to ask their mortgage provider other than “What is your rate?” There are so many features available in the market that rate is sometimes secondary. I also believe that most people don’t take advantage of the extra payments they are allowed to make, to pay it down more quickly.
With all the talk right now about the Organization for Economic Co-operation and Development or OECD warning that the Bank of Canada may have to begin raising rates in the early part of 2014 and that the rate may be double by the end of 2015, what should you as a mortgage holder be doing to protect yourself? When the Bank of Canada begins raising rates this will force variable rates to rise and long term fixed rates as well. What can you do to protect yourself from an increase in payments when your mortgage comes up for renewal? You need to take advantage of our Inflation Hedge mortgage strategy which will help save you thousands of dollars on your mortgage but will also provide you with protection from payment shock at renewal.
If you would like to set up a strategy session to talk about your mortgage and how you can pay it off quicker and protect yourself from the threat of rising rates then please call us at 250 862 1806 or email [email protected].
Nov 16, 2013 / 5:00 am
What You Should Think About When Financing Your Home
If you’re like most Canadians, your home is probably the most important investment you’ll ever make. Whether you’re buying a home or refinancing your existing home, making the right decision now can help save you money and provide greater financial stability for your family in the future.
To help you make an informed decision, Canada Mortgage and Housing Corporation (CMHC) offers the following tips on what you should think about when financing a home:
Calculate in advance how much home you can afford. Mortgage Professionals use a few variables to determine the maximum mortgage you can afford: your household income, your down payment and your debt payments including your new planned mortgage along with major related expenses such as property taxes and heating.
Consider getting a smaller mortgage than the maximum amount you can afford. Your future financial picture may not be the same as it is today. By taking on a smaller mortgage than the maximum amount you can afford, you will gain the flexibility and peace of mind to manage your other obligations today and deal with any unforeseen events that might occur in the future.
Evaluate the impact rising interest rates could have on your monthly payment. For many homeowners, a rise in interest rates could have a significant impact on their housing costs. For example, if you are renewing a mortgage of $250,000, an increase of just 2 percent in the interest rate could cost you around $300 extra each month. Evaluating the impact of future interest rate increases today could help you avoid potential financial difficulties tomorrow.
Become mortgage free faster by reducing your amortization period. On a mortgage of $250,000, choosing a 25-year amortization instead of a 35-year amortization will increase your monthly payments by about $200, but will also save you around $90,000 in interest over the life of your mortgage, and make your family mortgage-free 10 years sooner.
Choosing an accelerated payment option (equivalent to one extra payment per year), making lump sum payments or increasing your regular payment amount all contribute to reducing your amortization period. For example, making one extra payment per year on your 35-year mortgage will make you mortgage-free 6 years sooner.
We are here to help you manage your mortgage every step of the way. Please call 250-862-1806 or email at [email protected]
Nov 2, 2013 / 5:00 am
Anyone who has lived in the same house for a number of years inevitably gets the reno itch. While a gut job is expensive, home renovations are still an affordable way to upgrade without moving. “It's natural that after a certain point, homeowners start to notice the flaws in their homes,” said Farhaneh Haque, director of mortgage advice at TD Canada Trust. “It could be that the layout is no longer practical, the bathrooms are outdated or the exterior needs some curb appeal. Each of these areas can increase the property value of a house while making it more suitable to the homeowner's needs.” Before picking up the hammer and hardwood, Haque recommends that home buyers plan for the cost of a home renovation:
• Consider upgrades that save money: Green options, like installing insulated glass windows may cost more initially, but they can make sense financially in the long-run when future energy bill savings are considered.
• Research and budget for the unexpected: The reality is that a home renovation often costs more than planned. Before starting any work, consult with more than one contractor to help accurately assess costs of materials and labour. It's also a good idea to build a buffer into the budget for any unexpected expenses.
• Explore financing options: A home equity line of credit (HELOC) allows homeowners to use the equity they've already built in their homes to finance upgrades at a competitive interest rate. Consider using a HELOC to pay different tradespeople as the work progresses to avoid paying interest on credit that hasn't been used. With ongoing access to credit, it can be tempting to go overboard, so remember to stick to the budget.
For further advice on financing a renovation, contact me and I would be happy to assist you (250 862 1806 or [email protected]
Oct 19, 2013 / 5:00 am
According to a recent survey released by the Canadian Payroll Association, 59% of us don’t have enough saved up to pay for next month’s necessities if we suddenly got laid off. If you find yourself living paycheque to paycheque where you are finding it difficult to save because you’re either spending too much, don’t have a financial strategy and/or your investment choices haven’t been doing as well as you’d hoped, here are some tips on how you can keep more of your money.
Basic first steps – Before making any decisions about what to do with your money, you have to make sure that you have enough of it on hand.
DO pay yourself first. That’s the most important rule. Take an amount from each paycheque and set up an automatic savings or investment plan. Putting 10% of your gross is a good start but whatever amount, make sure you don’t spread yourself too thin. After awhile, you won’t even notice this amount disappearing.
DO pay off your consumer debt before investing. It’s like earning a return that equals the interest charged on your debt. For instance if you’re carrying a credit card balance of $1,000 with 18% simple annual interest, that’s $180 a year in charges. Pay off that debt and you’ve saved $180. That’s the same as investing $1,000 in something that earns an 18 % return after tax. In fact, if you’re in a 50% tax bracket, you would have to earn 36% to emerge with the same $180 in your pocket.
While your home’s value may have greatly increased, you may also be paying more than necessary on the mortgage.
DO refinance your mortgage if your rate is more than 2% higher than current rates, and you have less than 2 years until maturity. Check with your mortgage holder to determine the penalty for getting out of your deal.
DO consider a variable or floating rate mortgage if you have built up equity in your house and are able to tolerate the risk that your monthly payments will fluctuate. Speak with your mortgage broker to determine if this is an option for you.
Expect ups and downs. Too much risk can hurt your portfolio’s growth rate but so can hiding in ultra-safe investments paying one percent or less. Ideally, your portfolio should be able to keep its head above water during prolonged market downturns and be positioned to grow when the economy and market soar.
DO look at staying invested for the long haul. Don’t chase every fad as studies have shown that it’s long-term discipline that provides above-average returns.
DO diversify. But don’t overdo it. To start, you need the right mix of stocks and bonds. A general rule of thumb is that the percentage of your investment portfolio consisting of fixed-income holdings should equal your age. The thinking is, you become more conservative as you get older.
DO know when to sell. The toughest thing for any investor is to sell. One suggestion is that no holding should make up more than 5-6% of your portfolio.
If you need further information as always feel free to call us at 250 862 1806 or email [email protected]
Read more Home Finance articles
- Make your home toxic free Oct 5
- First time home buyer mistakes Sep 21
- Smart back-to-school shopping tips Aug 24
- Eight ways to save money Aug 10
- Benefits of using a mortgage broker Jul 27
- Home equity vs. 2nd mortgage loans Jul 13
- Home renovation tips Jun 28
- House hunting: finding the right fit Jun 15
- Designing a water efficient garden Jun 1
- Tips for a stress-free summer move May 18
- Selecting the right mortgage planner May 4
- Establishing credit history Apr 20
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