Lower your debt with your mortgage!
“Where does it all go?”You’re looking at your T4 from last year or maybe your most recent pay stub. Sure many people wish that those numbers after the dollar sign were a litter higher but it’s the vanishing act that alarms your the most. Tax time is especially sobering: you can see how much money you made…. but your credit card is still maxed out and you don’t have much to show for a year’s income.
If you are looking for the holes in your wallet start by making a list of your debts. Are your credit cards teetering at the top of their limits? Do you make regular use of your overdraft protection at the bank? Do you have escalating tax liabilities? What about any department store cards? Do you know what interest rate you are paying on them? Have you added it up? Many Canadians are startled to see how much they are actually paying to service their debt.
Industry Canada, which monitors consumer data, reports interest rates for department store credit cards as high as 28%! Even competitive rate credit cares will often run at 18% or more. This is also at at time when mortgage rates are dropping.
Why do banks and department stores charge such high rates? These are unsecured debts, meaning that if you default on the debt the lender has no easy recourse to recover the money. Not surprisingly they charge a higher interest rate, and sometimes a MUCH higher interest rate, to compensate for the higher risk that an unsecured debt represents. A house is considered a reliable security, so mortgages often offer the best rates anywhere.
Consider this then. If you have equity in your home, you can take advantage of attractive mortgage rates to save a bundle on interest charges. Compare current mortgage rates with the rates charged on your other debts. Seek some professional advice on whether it might pay to do some restructuring and roll your other debt, such as your credit card debt and tax liabilities into your mortgage. You can consolidate your debt into fewer payments and save some money on interest and improve your cash flow at the same time.
You have a few options: A secured line of credit could provide you with funds up to 75% of the value of your home, minus any mortgage debt on the home. You can look forward to a substantial reduction in the interest rate and all you need to pay each month is interest, ( this is both good and bad). You can do the math on this comparison yourself, or talk to a mortgage professional like us. If you are carrying credit card debt you will be shocked at what you can save with a secured line of credit.
You could also consider increasing your existing mortgage. If your mortgage is coming up for renewal, this the perfect time to reorganize and consolidate your debts at today’s excellent rates. Even if you are in the last year or two of your mortgage, it may make sense to restructure your finances and roll in your other debt at a much lower rate.
Your best option will be clear to you once you have discussed your situation with a mortgage professional. So feel free to contact my office today to see how we may be able to help you.
Cheers,
Pat
Are you sitting on a “Gold Mine”?
“A penny saved is a penny earned”, or so the old proverb goes. Of course, the value of a penny has changed somewhat from the time when your mother offered her wisdom on the value of keeping what you earn. Today, you could save thousands of dollars by simply making the right mortgage decision. If you are like most Canadian homeowners, your mortgage could be a gold mine of potential savings.
In the past few articles, we have talked about the importance of your mortgage as one of your most significant financial decisions. We have explored the value of seeking the advice of a mortgage professional whether you are buying, or renewing your current mortgage. Today, let us take a look at the bottom line, the savings that you can enjoy by making the right mortgage decisions.
It is the primary goal of a mortgage professional to find you the right mortgage product for your personal situation. A good mortgage professional is a financial professional and like your investment advisor, they want to understand your personal situation. Your mortgage professional has access to a wide variety of lenders, from institutional, trust to private, so they can help you to do some valuable comparison shopping for the right combination of terms and conditions to suit your needs.
All these choices offer you substantial opportunities to save money over the life of your mortgage.
If you are like most homeowners, you are focused and for good reason on finding the best possible terms for your mortgage. ( Notice I did not say rate!). A good mortgage professional will find you the best possible rates and terms to suit your needs. If we can talk about rate for a second, if I can save you 1% on your rate, that would translate to more thank 13K in interest per 100K borrowed over 25 years.
As I said there is more to it than just rate. There are other ways to find savings in your mortgage. A good mortgage professional is up to date with the latest terms and conditions, and we can custom fit a mortgage for your requirements.
As I covered in previous postings there are many ways to mine your mortgage for gold. If you are interested in how your mortgage may be used to help you live a debt free lifestyle, then ask us about a no obligation debt analysis. So we can show you how much sooner you can be living a debt free lifestyle.
Cheers,
Pat
Fixed or Variable Rate Mortgage?
“Wow”! You say to your wife as you hit the bakes on the car. “Did you see the mortage rates those guys are advertising”? Your worries are over you’re thinking. Just lock in a rate like that for the next 10 years and you’ve got it made!
Not so fast. That rate may not be the one for you. Typically, the lowest available rate - and the one that makes the rate sign look great from the street - will be for a variable or adjustable rate mortgage. That rate has the potential to be like a roller coaster. The posted variable or adjustable rate is the rate that you’re getting today. Unless you have an economic ouija board, you will not be able to predict what kind of ups and downs are ahead of you.
Let’s take a closer look. A lender will offer different rates for different types of mortgages. The rates are determined based on financial risk to the institution and to you. When a customer is willing to take on the risk, they are rewarded with a lower rate. If the lender is taking on the risk ( by that I mean that the customer is promised a particular rate for a set period of time regardless what happens in the market) then the rate is higher. The loner the term then the higher the risk for the financial institution.
So how do you decide? Fixed rate mortgages, because they require a low risk tolerance are usually better suited to first time home owners or those who do not keep an eye on the financial markets.
Ask your self these questions:
Do you like or need to know exactly what your payment is going to be over a long period of time?
Do you want to avoid the need to constantly watch rates?
Do you prefer the piece of mind of set it and forget it?
If you answered “yes” to all or most of these questions, then a more fiscally conservative fixed rate may be best option for you.
A variable or adjustable rate mortgage is best suited for people who have a flexible budget and can tolerate higher risk. Ask yourself these questions:
Do you watch market conditions?
Could you handle any sudden rate increases that would increase your payments?
Would you take a lower rate if it meant the possibility of your payment changing several times over the life of your term?
If you answered “yes” to all or most of these questions then a variable or adjustable rate may be the best option for you.
Some lenders offer a special promotional or teaser rate for the first few months of a variable rate’s term. Ask your mortgage professional how this could be good for you in the long term. Also discuss what your rate will be based on, will it be prime, prime minus .3, .5 or .8%. Also you should know that most lenders will offer you an option to lock in your variable rate to a fixed rate at any time for the remaining portion of your term or for a longer term.
If the uncertainty of going with a floating rate will cause you to have sleepless nights, then that is not the option for you. In fact many Canadians choose the security of a fixed rate mortgage. They know exactly how much they will pay over the term of their mortgage, and they can plain accordingly with not financial surprises. However if rates do drop, then you committed to the promise that you have already made. You should know this that during the past 10 years 5 year fixed rates have averaged 5.5% while variable rates have averaged 5%. As a mortgage professional I can help you make the best choice, call me so I can find out what works for you.
Cheers,
Pat
Why you will not see mortgage rates on this site!
At least two-dozen times a week we have people call us and ask, “What’s your rate on a 5 year fixed rate?” Most times when we try to get additional information from the potential borrower. Unfortunately, for both the caller, and us they don’t want to tell us anything. “I already know what I want, just give me a rate,” is the usual response.
Now, I’m not encouraging you not to shop-around for the best rate.
But, asking for a rate without giving more information is a bad idea. Why? Because frankly, anybody can give you any rate quote they want to over the phone, there is no way you can hold them to that rate. You see, there are two kinds of mortgage companies out there, those that are only interested in you as a loan customer and those that look at you as a client for life.
Those companies that want a fast buck know that they can quote you anything they want to just to get you in the door, then they can use whatever excuse to “convert” you to a different loan with a different rate.
Those companies that want you as a client for life, will take the time to ask for as much information as possible, up-front, so they can not only give you the best rate possible, but they can also quote you the best loan program for your situation.
Additionally, far too many people think they already know what loan program is best for them.
You may think you already know what you what, but unless you know all of the options in the marketplace you may miss an opportunity for a better loan program or situation that you didn’t know existed.
Let me ask you, have you ever gone into a store to buy a specific product, but came out with something entirely different? If you did it was probably because you didn’t know the new product even existed or a knowledgeable person in the store gave your new information that helped you make a better decision.
That’s they job of a competent loan officer, to use their years of expertise to help you select the best option for your situation.
Please, don’t assume you know what’s best for you.
Now, I’m not saying that you shouldn’t make the final decision. After all, it is your money, your home and your financial future. However, there is no harm at all in letting a competent, well trained mortgage professional give you several options, then you select which you believe is best for you.
Cheers,
Pat
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