Lots of times, I write my own articles but I’m also fortunate to have a fantastic Marketing team that supports us.  One of their  most recent articles was “25 Secrets Your Banker Doesn’t Want You to Know”.  There was too much good information here not to share.

Twenty-five or thirty years can sound like an impossibly long time to service a loan – and for many of us, it is. If you are looking to pay off your mortgage faster, here are some tried-and-true tactics to get you to financial freedom that much sooner!

1. Make a Double Mortgage Payment: A double payment once a year can shave over four years off the total life of the mortgage! Better yet, if your mortgage allows for double-up payments, another option is paying an extra $100 into your mortgage – per month. This can save you over $26,000 in interest on a 5.5% fixed-rate, 25-year amortized mortgage.
2. Increase Your Payment Frequency: Changing your mortgage from monthly to bi-weekly accelerated payments can shave over three years off your mortgage. At $2,000 a month, three years of no payments is worth $72,000 (not to mention the interest saved!).
3. Increase Your Payment: Did you know? A one-time 10% increase can shave four years off the mortgage. That’s $96,000 in savings! Imagine if you bumped the payment 10% every year from the get-go. You would be mortgage-free in 13 years—start to finish! Can’t do it? How about 5% every year? You would be mortgage-free in 18 years! You can also consider increasing the payment by the amount of your annual raise.
4. Lump Sum Payments: This is another option to become mortgage-free even faster! Even just one extra payment a year equivalent to one monthly payment will give you similar results as #2 above. Annual work bonuses or other extra-income is a great option for this.
5. Renegotiate When Rates Drop: Revisiting your mortgage is a good idea when rates drop. However, it is always best to get expert advice from a mortgage broker to ensure it makes sense for you. If so, the benefits can be huge! For instance, a 1% reduction on a $300,000 mortgage will save $250 a month—times five years, that’s $15,000.
6. Maintain a High Credit Rating: Even if you have already qualified for the mortgage you want, don’t let your credit rating slip. Pay your bills on time and keep balances low in relation to limits on credit cards, lines of credit, etc. Ideally, using 30% or less of your available credit will garner the highest results (assuming you pay the balances in full every month). Even if you’re filling your card to its credit limit max and paying it off in full each month, it will look like you are maxing out your credit limit and your credit score will drop accordingly.
7. Increase Your Mortgage: Increasing your mortgage for the purpose of debt consolidation can be helpful for paying off credit card debt, line of credits, car loan and so on for a better rate and a set payment plan.
8. Make an RRSP Contribution: By making an RRSP contribution, you can then use your income tax refund to pay down your mortgage!
9. Switch to a Variable Rate: Switching your mortgage to variable-rate while keeping your payments the same as if on fixed can help you pay your mortgage faster. Since variable rates are typically lower, you will be paying more to your principal loan versus the interest.
   • Caution: Variable rates are not for everyone. Always be sure to seek my help to find out if variable-rates are the best choice for you.
10. Take Your Mortgage With You: When you move, switch your old mortgage to the new property to avoid a penalty or higher rate on a new mortgage. This is called “porting”, however not all mortgages have this feature so be sure to ask! It is not widely known but could save you a ton of money.
11. Set Up Automatic Savings: Even setting aside $10 per paycheck can help! When your extra savings reaches the amount of one mortgage payment, apply it to the mortgage! This concept goes nicely with #4.
12. Unhook From The Money Drip: Stop paying with your fancy points credit or debit card. These make it way too easy to overspend. Go old school, go off the grid and pay cash. It works and can help you stay on track!
13. Don’t Buy on Layaway: You know, those don’t-pay-for-six-month “deals”, well a lot can change in six-months and you’ll still be on the hook. If you cannot afford it now, don’t buy it. Wait until you are financially able to make the investment.
14. Downsize Your House: Are you living in a 5-bedroom family home but your kids are grown up and moved out? Consider downsizing to a smaller house. It will save you money on your mortgage payments and maintenance fees in the long run!
15. Rent Out the Basement: Not ready to move? Consider converting spare rooms to rental and use the income to pay down debt.
16. Make Your Mortgage Tax-Deductible: If you are self-employed, own rental property or have investments, this is likely possible. Check with your Dominion Lending Centres mortgage broker to see if this option is right for you!
17. Prioritize Your Payments: Define your various debts by category. This can help you see where you spend your money and also help you pay off your debt faster.
18. Start With the Highest-Interest Rate: Pay off loans with the highest interest rates first, as these are the ones eating into your extra income!
19. Leave Tax-Deductible Until Last: Pay the non-tax deductible loans first and fastest and leave tax-deductible debt to the end.
20. Focus on Ugly Debt First: Debt such as credit card balances are the worst on your credit rating. Pay these off first.
21. Pay Off Bad Debt Next: Debt for items that depreciate in value, such as car or boat loans, should be the next on your priority list.
22. Clear Good Debt Last: Loans such as mortgages or investments for assets that should appreciate in value are the least harmful to your net worth and can be paid out last.
23. Buy a New Car – Outright! Finance it if you have to but don’t lease, unless you are self-employed in which case leasing makes more sense.
24. Use Your Secret Stash: If you have $20,000 in a bank account for a rainy-day or vacation and yet owe $20,000 on a line of credit, you need to reconsider. The bank account is paying you next to no interest (which is taxable income) and the line of credit rate is way higher (and not tax deductible). You know what to do. You can keep the line of credit open and on standby for a rainy day. Make it the secret line of credit that you have but never use.
25. Give your Banker More Money: No, really. Keep enough in your chequing account to meet the minimum requirement to waive your service charges. Some banks charge a fee for transactions and nothing, zero, zilch, zip if you keep $2,500 in the account. Let’s see, $10 x 12 is $120 a year to pay off debt. I’d have to earn 5% with the $2,500 in my savings account to come out ahead. No-brainer here. Oh yeah, if you need more than 25 transactions a month, see #12 above.

Let’s face it, your financial future will not get any brighter if you continue to run deficits forever. Unlike a bank or big company, you won’t get a bailout! Stop procrastinating and take charge of your own finances with the above tips!

BORROWER BEWARE:

It is always important to take things with a grain of salt. This is especially important when it comes to too-good-to-be-true, ultra-low-rate mortgages. These “no frills” mortgages are often loaded with restrictions such as pre-payment limitations, fully-closed terms, stripped-out features or unusual penalties. If you’re not looking at what you’re giving up, you may regret it in the future. These hidden terms alone could prevent you from taking advantage of tips #1, 2, 3, 4, 5, 7, 8, 9, 10, 14, 16 and 22!

We are full into spring home-buying season after what was already an unusually busy 3 months, I thought I’d delve into the subject of subject free offers.

If you truly want to go in subject free because you believe it’ll be the only way to land your dream home, then please ensure that you take note of the below in addition to of course having conversations with your realtor and your mortgage broker (in this case me):

• You have more than 20% down and I don’t mean 21%, I mean 25 – 35% down payment.
• You have a really good understanding of what the worst-case scenario will be and that worst case scenario could be that you lose your deposit and a lawsuit ensues and you’re ok with that.
• If you can’t get the financing through A lender, B lender or even Private Lender then perhaps you have the Bank of Mom & Dad who can give you the money to complete on the home.
• You have at least 1.5 months till closing date so that if something does go wrong with the property then we have time to figure out a solution. It’s important to note that a lot of lenders require that all conditions be met 10 business days in advance of closing!
• You have access to the home before you write up the offer and you order an appraisal AND an inspection which is completed in advance of you going in subject fee. Appraisals will cost anywhere from $300-$400 and look at any non-conforming issues, structural issues and economic life.  A lender won’t be lending on a property if the remaining economic life is less than 15 years.

As a broker the reason why, we stress so much that a client shouldn’t be going in subject free is most clients wouldn’t have the stomach or the means to deal with the above.  And lots of times it’s not that the lender doesn’t love you it’s cause they don’t love the property.

If you have less than 20% down don’t ever consider going subject free because really the biggest challenge is that you’ll require an insurer for your purchase and although we have lots of lenders there are only 3 insurers.  And if there’s something that they don’t like about the property and they can’t get on board you’ll be left to walk away from the contract and as mentioned above could lose your deposit or even be sued for breach of contract.

In the current environment many properties are going over asking and the insurer can ask for an appraisal and if that appraisal comes in under what the purchase price is, do you have the extra funds to make up that difference?  Most people that have less than 20% down payment have just enough to make the transaction happen not extra.

This is even more important for stratified homes such as condos/townhouses as most lenders will be reviewing the AGM Minutes and if there is a red flag that they feel uncomfortable with they won’t move forward.

Sometimes for a detached home where there are no minutes it’s what the lender sees in the inspection report or appraisal, is there old plumbing and electrical systems?  Does it conform to today’s requirements?  If not, the lender can say no to that property.  If you have the funds to get it up to spec they might say yes, they still might say no.

And please, please ensure that if you are going to still go ahead and make an offer subject free ensure that you are fully pre-approved, and your file has been underwritten.  What does that mean?  It means that your broker (in this case me) has reviewed your paystubs, your NOAs, your down payment, your credit etc.  It means being open and up front about everything in your file so that we can limit the surprises that may or may not come up once the lender reviews your file and the subject property.

If a bank has pre-approved you and it took less than 5 minutes, don’t count on it being an actual pre-approval especially if they’ve never asked you for a single document and all they asked was for your income and multiplied it by 5 or 6.  The piece of paper they gave you is a rate hold and even that isn’t a guarantee!

In short if you can avoid going subject free I would.

As always if you have any questions, I’m here for you and if you know of anyone who might benefit from this information, feel free to share it with them or have them reach out to me.

Stay safe and healthy,

Kimberly

To buy or not to buy.  There are so many factors that go into purchasing a home but if you’re currently a renter who is contemplating getting into the market here are some factors to think about on whether to make that move into home-ownership.  Remember it doesn’t have to be your forever home just an opportunity to be part of the Lower Mainland real estate market.  And let’s face it, if I knew what I know now….I probably would have done everything I could have 20 years ago to save & scrimp so I could have set myself up with my first condo back then and subsequently used that equity to keep moving up.  Hindsight is 20/20.   Still grateful though for purchasing our condo back in 2010 because since that time our investment has doubled and we’re fortunate to live in the heart of Vancouver where we can walk to school, work and the shops.

Here’s a few easy questions to ask yourself:

1. Have you saved enough for at least a 5%-6.5% down payment & closing costs towards your first home? This can be in cash savings, RRSPs, TFSAs, Employee Stock options or even a gifted deposit from the Bank of Mom & Dad.   Download my Mortgage Toolbox app to figure out what those costs might be.
2. Do you have a stable, regular income source whether you’re salaried or self-employed?  Lenders will review your income average over the last two years and whether you are in a full-time permanent role or earnings as a self-employed have been regular.
3. Do you have a credit history?  It may seem counterintuitive but make sure to have at least one credit card and use it regularly and pay it off every month. Having another bill such as a phone or internet bill also helps establish credit.
4. Do you have a healthy credit score?  Check your credit score by getting in touch with Equifax or Transunion by phone or mail every once in a while.  It’s a good idea to check it to ensure it’s up-to-date and accurate.  You can also use a service like Credit Karma.
5. Have you got a handle on your consumer debt? This goes hand in hand with the above.  Do you have lines of credit, balances on your credit card or other sources of debt such as student loans.
6. Do you know how much you can afford? A 30-minute Discovery call with The Mortgage Maven aka me can help answer this one.
7. Are you familiar with the real estate market in your preferred neighbourhood? Once you’ve figured out what you can afford, you can then work with a Real Estate Professional to help find your first home to get your foot into the real estate market.  I’m happy to refer you to one of my trusted partners.

Vancouver will continue to be a top best city to live in the world so if you’ve answered yes to the first five questions then let’s book a time together to see what you can afford.  I think you’ll be surprised.