When I work with clients, part of what I do is try to get a sense of who they are and what their future plans are. We touch on plans with respect to family, careers and real estate.
Taking the time to understand their longer-term goals helps me provide ideas and advice as to which mortgage(s) might be the best fit for them.
As an example, I have worked with an amazing family in northern B.C. on several purchases. We have talked about long-term goals, including adding more rental properties to their portfolio.
With their last home, I strongly advised going with a variable rate mortgage to allow them flexibility in case they needed to make any changes to their mortgage.
Fast forward and they are refinancing that home to pull equity out to buy two condos to use as Air BnB rentals.
Their current lender was not able to structure their potential refinance the way they wanted, so I went looking for another lender that offered the right fit.
We now have an approval in place, and, because they stayed the course with their variable rate, we are able to pay out the existing mortgage with a penalty of just under $2,000. I ran the numbers and if we had locked in originally (I had notes in their file as to the rate at the time), their penalty would have been just over $12,000.
Another couple I worked with sold one home and bought another. They had more than 50% equity in the new home. They too had been thinking about buying rental properties. When they bought the house, we did it with a lender that offered a combination amortizing mortgage and credit line.
They didn’t need the credit line at the time and did not advance any money at the time of purchase. They worked hard at paying down their mortgage and have substantially increased the equity in their home.
Because the credit line they have automatically increases as they pay the amortizing mortgage down, they have access to a great deal of money easily.
They called to talk about options for buying another property and we looked into their credit line. As it turns out, they had enough available to pay cash for what they wanted to do.
Thinking about your longer term plans can help your mortgage professional guide you to a great solution for the long run. The rates shouldn’t always be the deciding factor.
So, begin with the end in mind.
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.