CategoryMortgage Tips

Posted February 3, 2014 Case study

Lower rate = Lower payment and a Lower balance in 5 years!

We all know that a lower interest means a lower monthly payment. But did you know that a lower interest rate means you will also owe less when your mortgage comes up for renewal? This has been overlooked by consumers and experts alike. I haven’t seen any articles covering this. And it should change how you choose your next mortgage product.

It all has to do with the effects of compounding interest. Let’s take a look at 2 borrowers, each with a $400k mortgage. Borrower 1 is Mary. Borrower 2 is Dave. Mary has today’s 5 yr fixed rate of 3.29%. Dave has the more normal rate of 5.50% (the rate most experts think we will see in the next 3 to 5 yrs). We’ll amortize both mortgage over a 25 yr term.

Dave’s mortgage has monthly payments of $2441 and a balance owing of $356,749 at the end of 5 years. Mary’s mortgage has monthly payments of $1953 and a balance owing of $343,728 at the end of the first 5 years. Notice the difference in the balance owing after 5 years. We are talking about a $13,021 difference. That’s the effects of compounding interest. Continue reading “Lower rate = Lower payment and a Lower balance in 5 years!”

Posted January 30, 2014 Mortgage News

Olympics are coming.. and so are the dumb bank ads.

I’m a huge hockey fan. I love watching Olympic hockey. It’s fast paced and every game counts. If you’re like me, then you’ll probably be glued to the TV set watching and cheering on Team Canada. GO CANADA GO!

Unfortunately, that means you’ll also have to put up with those dumb bank ads. These ads drive me nuts. They deliver a terrible message to consumers. Here’s one from RBC from the 2010 Olympics about a young couple buying a home, probably their first, and the RBC mortgage specialist recommends they ‘split their mortgage to save money…. part fixed and part variable’. Anyone get that? Sounds like some sort of magic solution. Confused? You should be.

Splitting your mortgage is probably the worst thing you can do. Here’s why the BANKS like it. There are certain BANKS that will allow you to split your mortgage into 2 or more parts. This product was introduced in the mid ’90s. Now ask anyone that took this type of mortgage it they’d ever take it again. NO WAY! Continue reading “Olympics are coming.. and so are the dumb bank ads.”

Posted January 20, 2014 Case study

Buy now or wait for house prices to fall? The results may surprise you…

Should I buy now with interest rates still hovering at record lows, or wait for prices to fall? When will house prices fall? … and by how much? What will the interest rate be in the future when house prices fall?

These are the questions most Canadians asking themselves these days. It’s no secret that Real Estate values are at an all time high in most parts of the country. The calls for a housing correction, crash, or bubble have been going on for almost 10 years now but it hasn’t materialized.

I won’t get into the discussion here about whether house values will drop or crash or when that could happen.. because I don’t think it should be part of the buying decision. That’s not a typo. Market timing is a dangerous thing. Stock advisors will tell you this. Buy now, if you are able to commit to the plan. Read on to see why I believe this to be true. Continue reading “Buy now or wait for house prices to fall? The results may surprise you…”

Posted January 6, 2014 Consumer Debt

How to get rid of Holiday bills and start building wealth.

Most Canadians suffer with their highest personal debt load in January, when the “holiday hit” arrives and your credit card statements let you know just how much you spent on the festive season. It’s especially hard if you already had a burgeoning debt load before the holidays.

This year, make the best New Year’s resolution ever: resolve to clear that debt, and start building wealth. Continue reading “How to get rid of Holiday bills and start building wealth.”

Posted December 17, 2013 Money saving tips

Top 10 Mortgage Tips for 2014

A peek at the year ahead: Our Top Ten Mortgage Tips for 2014!

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.

1. 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. Let us help you decide which financing option best meets your needs.

2. Don’t sleepwalk through your mortgage renewal. Don’t miss out on an opportunity to save thousands on your mortgage. When your lender sends you a letter saying it’s time to renew… then it’s time to get an expert second opinion. We’re independent and we have access to over 50 lenders. If there’s a better deal, we’ll find it.

3. Pay your phone bill on time!Paying your bills 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.