Get the Most from Your Financing with a Mortgage Check Up

Have you thought about your mortgage lately? Your financial picture can change significantly over time, and having the right mortgage strategy is an important part of making sure your financial needs and goals are met.

A personalized mortgage check up is an easy, no-obligation way to:

• ensure that your repayment approach suits you, for example with payments structured to maximize mortgage principal reduction,
• ensure any consumer debt you may have (such as credit card balances) is transferred to a lower interest rate,
• ensure you have access to the lowest-cost funds for renovations, education or other major expenditures.

Common reasons for a mortgage check up:

• You are planning to have children
• You want to explore your investment options
• You or your spouse have had a change in employment
• You are looking to start or buy a business
• You would like to renovate your home
• You would like the assurance of fixing your mortgage payments
• You are trying hard to manage your payments
• You can’t remember the last time you assessed your home financing strategy

Thank you to our good friends at Invis for this really great checklist.  Please give us a call and we will provide expert, unbiased advice to first time homebuyers as well as those looking to renew or refinance their mortgage, purchase investment properties, or consolidate debts.   604-736-1855

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I wrote this article for the Averbach Monthly Newsletter, but since not everyone who visits the site has subscribed I thought I’d also post the article in the blog.

If you are considering getting a new mortgage with lower interest rates, you WILL get dinged by mortgage penalties.

The amount of the penalty depends on your existing mortgage rate and the current rates.  When fixed rates go down, your penalties to get out of your current fixed rate GO UP!

You need to know how much your penalty will be before you decide to refinance or do an “early switch” with prepayment penalties.

Here is an example of a BASIC Interest Rate Differential (IRD) calculation:  
Based on a $200,000 with 3 years remaining on a 5 year term of 5.70%

There are 3 years remaining, so we will use the current 3 year rate to calculate the differential.

If the lenders current 3 year rate is 4%, there is a difference of 1.7%.

Because there are still 3 years left, the principal is multiplied by 3

$200,000  x  1.7%  x    3     =  $10,200 penalty

**This calculation is an estimate and will change every time mortgage rates change. If the differential increases, the penalty will also increase.

The BIG question is … Will you still save money by refinancing?

Here is how to do the IRD calculation.

Step 1: ________ (A)
What is the current interest rate of your Mortgage expressed as a decimal (for example, 6.75% = .0675).

Step 2: ________ (B)
What is the current interest rate (choose the term closest to your remaining term).

Step 3: ________ (C)
A – B = C, which is the difference between your current interest rate and the interest rate in B above (write C as a decimal).

Step 4: ________ (D)
Amount you want to prepay (if any).

Step 5: ________ (E)
Number of months for the remaining term of your Mortgage.

Step 6: ________ (F)
(C x D x E) ÷ 12 = F, F is your estimated Interest Rate Differential Amount  or  “the penalty amount.”

If you want to find out the best rates available … I can do the calculations for you!  Just give me a call and I’ll help you decide if refinancing at today’s low rates will save you money and if it makes sense for YOU!

Justin Blacklock
604-736-1855.

If you are considering the purchase of your first home, an interesting survey conducted by TD Canada Trust found some interesting tidbits about first time home owners in BC.

Contrary to the popular belief that the housing market in BC is too pricey to afford on your own, the report found that many first time home buyers ARE doing it alone!

In B.C., 47% of first time buyers plan to purchase their first home on their own (rather than with a copurchaser).  Nationally, nearly six-in-ten men (57%) will buy on their own, along with 33% of women.

Collecting some rent may make financing your first home more affordable.

After years of paying rent, first time homebuyers in B.C. say it’s time they started collecting it. According to the 2011 TD Canada Trust First Time Homebuyers Report, 56% of first time homebuyers in B.C. are looking for a home with a rental unit. Eighty-five percent think the unit will generate between $500 – $1,000 per month and seven-in-ten (67%) say the extra income will go towards paying their mortgage.

And though BC home buyers may want to go it on their own, or with the help of some rent … they also are saving for their initial down payment longer than the rest of Canada.

The survey also found B.C. buyers to be saving up the longest for their first home and putting down the
largest down payment. Nearly six-in-ten say that they have been saving for their first home for three
years or more (57% versus 47% nationally) and they are twice as likely to be putting down a down
payment of more than 25% (17% versus 10% nationally). Not surprisingly, given B.C.’s infamously
expensive real estate, buyers in B.C. are most likely to need a mortgage to finance their purchase (93%
versus 87% nationally).

If you are in the market for your first home … let us help.  In a hot market, it makes a big difference if you prequalify for a mortgage and how you present your case (rental income) to the financing company.

Give us a call and we will walk you through the entire process step-by-step. Averbach Mortgages is about simplifying the mortgage application process, no matter what your circumstances!  604-736-1855

Be sure to check out this additional  information:

Options and Resources for First Time Home Buyers

Fixed-rate mortgage better for first-timers

Read the Report:  2011 TD Canada Trust First Time Homebuyers Report

I’ve now watched a few episodes of the Women’s Channel program Burn My Mortgage.

Though the concept is great … the program exaggerates their money saving, mortgage burning tips beyond the possible.

For example, in one of the episodes  … the Mom in the family was going to return to work to help in the mortgage burning efforts.  She anticipated making $30,000 a year.

So what did the mortgage burning experts  do?  They applied $30,000 a year to their calculations.   Which is really cool, except what about:

• Income Tax
• Cost of getting to work — for example transportation
• Cost of working — for example buying clothing suitable to the work environment, which I suspect is a bit different from Mom-Wear.
• Other costs such as coffee, lunches, etc.
• Additional kid related costs such as entertainment, communication, transportation (the Mom bus is no longer available).

If the family was able to pay the mortgage down by even $15,000 a year, from Mom’s new salary, they would be lucky.

Another example of a beyond ridiculous “savings” was a family’s addiction to electronic devices … iPhones, the Internet, video games and the like.  If I remember correctly the monthly budget was $500 a month. Personally,  I didn’t consider high because I can rack up at least that much all by myself!  The experts cut the electronics budget by … you guessed it $500.00   Come on. Get real, what kid is going to give up the video games addiction!

So here’s my take on the program.   The savings CONCEPTS make sense … but their numbers are crazy.  Watch the program and utilize what ever ideas they come up with, but don’t expect to be burning your mortgage in the time frames they are showing.

We’ve done blog posts in the past on saving money and improving your credit score. Since the idea of Burning Your Mortgage and saving thousands of dollars in interest payments, is of universal appeal, we have decided to run our own Burn My Mortgage section in the Blog.   We’ll give you tips, tricks and ideas for cutting expenses and either saving for a down-payment … or cutting years off your mortgage.

Some of the ideas may appeal to you and work for you, while others may not … but the idea is to do what you can to pay down your mortgage faster.

The Women’s Network  is running a new reality show called Burn My Mortage.

The concept sounds great:

Burn My Mortgage shows homeowners that with a little bit of pain, there is a lot to gain when it comes to paying off one of life’s biggest purchases.

The price of real estate has gone sky high, and despite low mortgage rates, families are drowning in mortgage debt. Lead by our financial expert Kelley Keehn and motivator Chad Bisch, Burn My Mortgage helps families shave years and tens of thousands of dollars off their mortgages in an engaging and entertaining format.

Kelley and Chad push families to the extreme to prove that denial and ignorance are the only things preventing them from reaching that mortgage free life. If they follow Kelley’s rules and survive her savings challenges – they will be rewarded with a head start lump sum mortgage payment of $5000. But that’s just a start – find out how these families could take up to 15 years off their mortgage.

As you can see from the  show schedule there are several time slots during which the program airs:  Mondays at 4:00 PM, Tuesdays at 8)) and 11:30 PM and Saturdays at 4:00 PM

You can also watch Episode ONE . . . on your computer at any time.

I plan on watching a few episodes and will give you my feedback.  Feel free to add YOUR comments on the show below.

One of the common reasons for loan denial is … False or Incorrect Information.

You may not think of it that way, but the loan underwriters do.  In addition to the information you provide them with, they are also looking at your Credit History. They use your current information + your credit history to determine whether they want to grant you a loan.

Income is the number one area where most people either make a mistake or “exaggerate” and hope it gets by! This happens most often with self-employed professions or small business owners.

If you are unsure about your income levels play it safe and bring us your recent pay stubs and your past years tax records. This will help us accurately determine the amount you make.  If you are self-employed or own a business, talk to us about what you need in order to “prove” an income.

Always double and triple check your application form and make sure it is 100% correct!

If you need any assistance, please DO call us at 604-736-1855.