Finally, it appears that the banks are getting my message!

I’ve been telling my clients to plan ahead for the impending rate increases. Now it looks like the increases are about to happen.

The BIG problem with the banks is … they count on people thinking they are too busy, and yes, even being lazy. They will happily lock you into a fixed rate mortgage and have you believe that you are getting their best rate.

In fact most people won’t even ask, “Is this your best rate?”   They will assume that because they are loyal, long time customers that the bank will automatically give them the best rate.  If you were to assume that … you’d be wrong.

It only takes a few minutes to call us.  We will figure out if it makes sense for you to change and if it does, we will find you the best rate from amongst the dozens of financial institutions we do business with.  We are not locked into one bank’s offerings, and we DO have your best interests in mind.

The rates are going up, but it is not too late to take action.  Do it NOW before it is too late.

604-736-1855

We first ran this article in the June 2009 Edition of our newsletter. We are running it again because… at this point in time there is ANOTHER Perfect Storm!

A Refinancing Strategy for today’s volatile market

With the historic-low interest rates now available, many people are interested in refinancing to save money. The problem is (with most mortgages) the penalties are too high to make this a financially viable move.

In order for refinancing to make sense, you should end up with money in your pocket. The overall savings generated by a lower cost mortgage should be more than the refinancing penalties incurred.

As long as mortgage rates stay the same or get lower, it is highly unlikely that you will see any benefit to refinancing because of the high penalties … although there is a further benefit of having a fresh 5 year term as we cannot know what the rates will be when your current term comes up. One thing we are sure of is that rates will be HIGHER.

As mortgage rates go UP, the refinancing penalties go down.

IF you take action now you could benefit greatly when mortgage rates start to go up again. Currently, some lenders still have their 5 year fixed rates in the 3.79 – 3.89 range (see our rates page). These rates have never before been offered and may never again…in our lifetime.

What we do is get you the BEST rate we can and lock in the offer. Depending on the mortgage company we can lock in for 3 to 4 months and can often renew for another 3 to 4 months at a time. Then we wait. At some point the mortgage rates are going to go up again.

At the point where you are actually saving enough money to make the transaction worthwhile, we finalize your refinanced mortgage.

IN A NUTSHELL:

1. You lock in a rate-hold today via a pre-approval application while the interest is low.

2. You wait till the mortgage rates start to increase.

3. When the mortgage rates go UP, your penalty for refinancing goes DOWN.

4. When the transaction generates a positive cash savings for you … we refinance at the lower rate, with the lower penalty.



What do you need to do? Call us. We’ll let you know if this strategy makes sense for YOU!

The Vancouver Sun quoted us again for their November 28th “Tips for Buyers and Sellers” column … published on househunting.ca.

And of course we’d love it if you too relied on us for good solid information about getting the best mortgage for you and your family!

If the screen shot below is too small, be sure to read the original, whole article in our Newsletter Archives.

If the screen shot above is too small, be sure to read the original, whole article in our Newsletter Archives.

Selecting the length of your mortgage amortization period – the number of years it will take you to become mortgage free – is an important decision that will affect how much interest you pay over the life of your mortgage.

While the lending industry’s benchmark amortization period is 25 years, and this is the standard that is used by lenders when discussing mortgage offers, and usually the basis for mortgage calculators and payment tables, shorter or longer timeframes are available – to a maximum of 35 years.

Advantages of a Short Amortization:

The main reason to opt for a shorter amortization period is that you will become mortgage-free sooner. And since you’re agreeing to pay off your mortgage in a shorter period of time, the interest you pay over the life of the mortgage is, therefore, greatly reduced.

A shorter amortization also affords you the luxury of building up equity in your home sooner. Equity is the difference between any outstanding mortgage on your home and its market value.

While it pays to opt for a shorter amortization period, other considerations must be made before selecting your amortization. Because you’re reducing the actual number of mortgage payments you make to pay off your mortgage, your regular payments will be higher. So if your income is irregular because you’re paid commission or if you’re buying a home for the first time and will be carrying a large mortgage, a shorter amortization period that increases your regular payment amount and ties up your cash flow may not be the best option for you.

We will help you choose the amortization that best suits your unique requirements and ensures you have adequate cash flow. If you can comfortably afford the higher payments, are looking to save money on your mortgage or maybe you just don’t like the idea of carrying debt over a long period of time, we will discuss opting for a shorter amortization period.

Advantages of a Long Amortization:

Choosing a longer amortization period also has its advantages. For instance, it can get you into your dream home sooner than if you choose a shorter period. When you apply for a mortgage, lenders calculate the maximum regular payment you can afford.

They then use this figure to determine the maximum mortgage amount they are willing to lend to you.

While a shorter amortization period results in higher regular payments, a longer amortization period reduces the amount of your regular principal and interest payment by spreading your payments out over a longer time frame. As a result, you could qualify for a higher mortgage amount than you originally anticipated. Or you could qualify for your mortgage sooner than you had planned. Either way, you end up in your dream home sooner than you thought possible.

Again, this option is not for everyone. While a longer amortization period will appeal to many people because the regular mortgage payments can be comparable or even lower than paying rent, it does mean that you will pay more interest over the life of your mortgage.

You CAN Change Your Amortization Period

Still, regardless of which amortization period you select when you originally apply for your mortgage, you do not have to stick with that period throughout the life of your mortgage. You can always choose to shorten your amortization and save on interest costs by making extra payments when you can or an annual lump-sum principal pre-payment. If making pre-payments (in the form of extra, larger or lump-sum payments) is an option you’d like to have, I can ensure the mortgage you end up with will not penalize you for making these types of payments.

It also makes good financial sense for you to re-evaluate your amortization strategy every time your mortgage comes up for renewal (at the end of each term of your mortgage, whether this is three, five, 10 years, etcetera). That way, as you advance in your career and earn a larger salary and/or commission or bonus, you can choose an accelerated payment option (making larger or more frequent payments) or simply increase the frequency of your regular payments (ie, paying your mortgage every week or two weeks as opposed to once per month). Both of these features will take years off your amortization period and save you a considerable amount of money on interest throughout the life of your mortgage

As always, if you have questions about which mortgage amortization is best for you or how you can pay off your mortgage faster, please give us a call to discuss your options.

Call Justin Blacklock at 604.736.1855.

It’s great to know that people are reading our newsletters.  The Vancouver Sun picked up a bit from our last newsletter and quoted it in their October 31 roundup whis is also published on househunting.ca.

While No-Frills mortgage products typically offer a lower or more discounted interest rate when compared with many other available products, the lower rate is really their only perk.

This type of product will only seem ideal for you if you have no plans to take advantage of benefits that will help you pay off your mortgage faster  such as pre-payment privileges including lump-sum payments.

Essentially, this product is only ideal for:

• first-time homebuyers who want fixed payments and have limited opportunities to make lump-sum payments during the first five years of their mortgage; and
• property investors who need a low fixed rate and are not concerned with making lump-sum payments.

No-Frills products also won’t let you take your mortgage with you if you purchase another property before your mortgage term is up  ie, portability is not an option with this product.  Portability is an important option that could save you money over the long term if the home of your dreams is within your reach before your mortgage term is up and rates have risen, which they have a tendency to do over a five-year period.

It’s understanding why these products may seem appealing.  After all, during tougher economic times who has the extra cash to put down a huge lump-sum payment?

And who needs a portable mortgage if they’re not planning on moving until the market picks up? But it’s important to remember that a lot can change over the course of five years or whatever term you choose for your mortgage.

The thing is, you can still obtain great mortgage savings without giving up the perks of traditional mortgages.  For starters, many lenders are willing to offer significant discounts if you opt for a 30-day “quick” close.

There are, however, other ways in which to earn your own discounts.  For instance, by switching to weekly or bi-weekly mortgage payments, and by obtaining a variable-rate mortgage but increasing your payments to match those of the going five-year fixed rate, you’ll be ahead of the typical 0.1% discount of a No-Frills product within approximately three years.

No-Frills products represent a great example of why interest rates are not the only important factor to consider when deciding whether to opt for a particular mortgage product. Much like buying a car, you get what you pay for. If you don’t want a car with air conditioning, a stereo, a cup holder, and so on, then you can get the cheapest car going… but you’ll likely regret it later.

If you have any questions about which mortgage is right for you, please give  Justin Blacklock a call at 604.736.1855 to discuss all of your options and choose the best mortgage for your circumstances.