The arrival of a new year is the perfect time to give your mortgage a checkup. That’s the advice of Paul Macara, a mortgage broker with Beyer Mortgage Services.
“I always encourage my clients to look at their mortgage on an annual basis,” he said.
That allows people to take advantage of prepayment privileges to maximize mortgage principal reduction, he added. As well, high-interest debt can be transferred to a lower interest rate to boost cash flow and save on interest costs.
Reconnecting with your lender is also an opportunity to take advantage of attractive mortgage products and rates, which are floating around historic lows, and could provide access to the lowest-cost funds for renovations, education funding, a vacation or other large looming expense.
Among other mortgage tips for 2015, Macara suggests speeding up your mortgage paydown. That could include finding a way to use prepayment privileges this year at least once. Putting a tax refund, or a little extra cash you’ve managed to sock away, towards your mortgage will increase your return on future payments.
Instead of paying your mortgage monthly, why not pay it weekly or bi-weekly? That small change can save you thousands.
“Many of our trusted lenders offer fantastic prepayment privileges,” Macara said. “Many products allow you to prepay up to 15 to 20 per cent of your original mortgage balance every year on any of your regular payment dates. This payment is applied directly towards your principal and helps you become mortgage-free sooner.”
He said it’s important to always renew with your eyes open, calling it an opportunity to negotiate the best possible deal.
“I recently had a client come in with a renewal letter from one of the five big banks. The rate they were offering my client was one per cent higher than my best rate. Make sure you do a little research before you tick that renewal box. I always advise my clients come see me five months before their renewal date to ensure we get a rate hold in place.”
Those who purchased their first home last year could be leaving money on the table, Macara said. First-time buyers could be able to take advantage of the $5,000 non-refundable Home Buyer Tax Credit amount, which provides up to $750 in federal tax relief.
No matter what the year ahead will bring for you and your home, Macara advises to make sure your credit is in good shape. He said paying your bills on time and making sure your credit accounts don’t exceed 30 per cent of the credit available will help you qualify for the best mortgage rate possible. He suggests building a financial cushion by putting a small amount from every paycheque into a fund to cover any potential emergencies.
Q: WILL THE BANK OF CANADA RATE DROP AFFECT MORTGAGE RATES?
The Bank of Canada’s recent decision to drop its key interest rate to 0.75% could see a drop in short-term mortgage rates offered by the big banks, and smaller institutions, as the competition for home buyers heats up.
Homeowners with a variable rate mortgage could also benefit, as those rates are usually based on the prime lending rate.
Regardless of the result of the central bank’s rate, some mortgage rates remain as low as they’ve been since the early 2000s. While the average variable rate has remained around 3% since 2011, the five-year fixed rate is averaging less than 5%, the lowest again since the crazy days of 2003-04.
Touch base with your lender for more details.
GREATER VICTORIA MARKET UPDATE » MONTH TO DATE JAN. 26/15
» 265 / 342 — NET UNCONDITIONAL SALES/ TOTAL, JANUARY 2014
» 786 / 1,090 –NEW LISTINGS / TOTAL, JANUARY 2014
» 3,198 / 3,489 — ACTIVE RESIDENTIAL LISTINGS / TOTAL, JANUARY 2014