There’s something about September that signals a fresh start. It’s a perfect time to get serious about saving money on your mortgage. So get out your notebook: here are five surprising mortgage facts that can save you money over the long term!
Fact #1: Your credit score matters even more
Lenders are beginning to review client files prior to renewal, which means if your credit score has slipped, you may be offered a higher rate at renewal, even if you have never missed a payment. Regardless of where you are in your mortgage term, it is very important to always pay your bills on time, use only 30% of your credit limits, and monitor your credit score regularly.
Fact #2: Refinancing is still one of the best ways to get debt under control
If you’re holding too much high-interest debt and you have enough equity, consolidating all of it into a low-interest mortgage can save you thousands in interest, lower your monthly payments, boost your cash flow, and eliminate the stress of multiple debt payments. It can also improve your credit score!
Fact #3: Interest-only mortgages are once again available for those with more than 20% equity in their homes
While not a product for everyone, this can be a great financial strategy for those who want to minimize their mortgage payments to free up cash flow for other uses like investing, business needs, post-secondary education, maternity leave or other life situations. Lump sum payments can be made when the time is right for principal paydown.
Fact #4: Variable mortgages are popular
While fixed rates are higher today than they were a year ago, many lenders are offering exceptionally low rates on their variable rate mortgages. In addition to offering the ability to save on interest, a variable mortgage can be significantly less expensive if you need to get out of your mortgage later.
Fact #5: Insured mortgages get the best rates
If your mortgage is not insured, it’s possible that you weren’t eligible for the best rates available at that time. Some uninsured mortgages can now be switched at renewal to a new lender that will offer an insurable rate, a move that could offer huge savings. Not sure if your mortgage is insured or not? I can find that out for you.
If you have any questions about your current mortgage strategy, are thinking of refinancing, or getting closer to renewal, get in touch. I’m here to help you, your family and friends understand which mortgage facts are the most important at any given time.
Click here to book a no-obligation chat with PureMortgage to discuss your mortgage options: https://calendly.com/ronlefebvre
If you’ve been following economic news, you may have been surprised recently by a bit of news from the Canadian central bank. Despite a lot of predictions, Bank of Canada Governor has recently stated that the low rates we’ve been seeing lately have “done their work”. Basically, this is as close as we’re going to get to hearing him tell us outright that these rates are going to go back up shortly.
So what does this mean and, more importantly, what might this do to your variable-rate mortgage?
First of all, when the central bank decides to raise interest rates, it is a sign of confidence in the market. A lot of people have been concerned over the past few years that rising market prices were growing inflated and pushing into potential “bubble” territory. While that could have spelled disaster for the Canadian economy, the banks are now saying that the economy is not in danger of collapse, but is instead strengthening.
Back in 2015, the Canadian central bank cut interest rates twice and held the rate at 0.5% in an effort to stimulate the economy. Since then, the economy has, at least according to the central bank, stabilized and grown stronger. As a result, the Bank of Canada is most likely going to raise their interest rates, which will prompt other major banks and lenders to follow suit.
This is a good thing for the value of your home and a vote of confidence in the economy. The downside, of course, is that you could be facing higher interest rates in the near future!
Analysts were initially not expecting an interest hike until 2018 or late 2017 at the very earliest. Now, however, it looks like these higher interest rates could take effect as early as July of this year! If you have a fixed-rate mortgage, this may not affect you too much, but if you have a variable-rate mortgage, you need to keep an eye on this developing situation.
For those with a fixed-rate mortgage, you’ve already been affected by rising interest rates since your rates are affected by U.S. lending rates, which are on the rise. However, a surge in Canadian interest rates won’t immediately impact you. Instead, you will likely only have to worry about this when you go to renew.
If your mortgage is variable, a higher interest rate will most likely increase your interest as soon as the new rate takes effect. Although your variable-rate mortgage might, overall, offer a slightly lower mortgage rate than a fixed one, you may want to consider locking in your rate soon. Once these interest rates start to increase, it can be difficult to predict whether they will continue to rise and, if so, how quickly they will do so.
Although conventional wisdom often suggests that a variable-rate mortgage is a better option than a fixed-rate mortgage, this might be a situation where that doesn’t hold true. Although the overall interest rate of variable-rate mortgages is lower right now, it’s only about half a percentage point difference. So locking in might be the way to go, particularly if you are already barely making your monthly payments.
If you have a variable-rate mortgage, your best option would be to drop us a line at Pure Mortgage today. We’ll look at your situation and help you decide whether locking in your rate now would be the best way to ride out potentially surging interest rates. As always, no two situations are the same, so let us help you figure out what works best for you.