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,” said Macara.
He said that allows you to take advantage of your prepayment privileges to maximize your mortgage principal reduction and high-interest debt can be transferred to a lower interest rate to boost cash flow and save on interest costs.
It’s 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.
Some of Macara’s other mortgage tips for 2015 include speeding up your mortgage paydown.
He suggests finding a way to use prepayment privileges this year at least once. Using a tax refund or just a little extra cash that you’ve managed to sock away towards your mortgage will increase your return on future payments. And instead of paying your mortgage monthly, he recommends paying weekly or bi-weekly. That small change can save you thousands.
“Many of our trusted lenders offer fantastic prepayment privileges,” said Macara. “Many products allow you to prepay up to 15-20 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,” said Macara. “Make sure you do a little research before you tick that renewal box. I always advise my clients to come see me five months before their renewal date to ensure we get a rate hold in place.”
He said those who purchased their first home last year could be leaving money on the table. 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.
Macara also suggests that those looking at moving to a larger home might consider renovation instead. He said it’s almost always less expensive to renovate than relocate, and the right project may be all it takes to turn your house into the home of your dreams.
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.