Mortgage News | Oakville Real Estate, Alexx Coelho, Broker

Simple tip to pay off additional principal on your mortgage

January 2, 2012 (Monday) By Alexx Leave a Comment

Happy New Year!

As with every year past, this is a time when we all make resolutions. If one of your resolutions is to become mortgage free faster, here’s a quick tip that can help with that.

Here is a simple strategy to pay off additional principal on your mortgage.

Open an ally.ca account (or ING Direct, if you prefer, but ally.ca pays 2% interest right now, the highest available). This is a savings account that gets linked to your main bank account, but is held at a different institution. Benefit: You can’t withdraw funds very easily. It takes a day or so, this is good!
SAVE: Once that is setup, go to the ally.ca website and setup an automatic transfer from your chequing account (at your regular bank) to the new savings account. This is the crucial part of the exercise.

Make it an amount that you won’t notice coming out of your account ($25, $50, $100, $150, whatever you’re comfortable with.)
Make it come out on a weekly basis, rather than monthly. (You’ll notice $100 coming out each month, but likely won’t notice $25/week) – A smaller amount more frequently is better!

PAY DOWN: Every 3 months, transfer the money from your ally.ca account back to your chequing and write a cheque to your mortgage company. (Most mortgages have pre-payment options, USE THEM!) This is money that goes straight to paying down your principal.
REVIEW: Every 6 months, look at your finances and see if you can increase the transfer amount. (if you didn’t notice the transfers in the first place, increase them, and accelerate paying down your mortgage.)

What’s the impact?

Additional $6,500 off your mortgage after 5 years by just putting $25 per week aside. (That’s a Starbucks habit, by the way), PLUS $595 in interest savings (on a 3.5%, 25 year mortgage)
Up it to $100 per week, and you’re looking at an additional $26,000 off your mortgage at the end of 5 years (not to mention the interest saved!), PLUS $2,380 in interest savings (on a 3.5%, 25 year mortgage)

Unsure of how much you can afford to put aside? (Take half of your monthly cable bill amount, half of your Tim Horton’s bill, half of your cell phone bill, add it all up, divide by 4, and start with that as a weekly amount)

Let me know how you do.

Alexx

Filed Under: Homeowner Tips, Mortgage News

Take Control of your Mortgage

September 20, 2011 (Tuesday) By Alexx Leave a Comment

Take Control of your Mortgage

The biggest responsibility we take on as new homeowners is debt re-payment. That cursed mortgage: It enables us to get the home we want, but then sticks around for 20 to 35 years

It is every homeowner’s dream to be mortgage free, but are we doing everything we can to achieve that goal as soon as possible? (I don’t want to wait 25 or 30 years to be mortgage free, I want it A LOT SOONER than that.)

I found this company that specializes in spreadsheets, and they came up with an excellent mortgage calculator for Canadians. I use it extensively with my clients to figure out mortgage payments, personal budgets, and how it all ties in together. You can download it here: http://www.vertex42.com/Calculators/Canadian-mortgage.html (check out their other offerings for family and personal budgets)

Why I like this calculator:

It lets you put in all the details of your mortgage and choose your Amortization Period (Great for planning)
It shows you the Fully Amortized cost of your home (what it really costs at the end of the 20-30 years)
It shows you the Balance at Term (what you’ll have to renew in 3-5 years – The Interest Paid should make you ill)
It lets you factor in Extra Payments, and as you do, reflects the impact on your Mortgage. (This is the really cool part of the spreadsheet! This is how you become MORTGAGE FREE!)

Most mortgages today have pre-payment options that allow you to make extra payments, this tool helps you visualize taking advantage of those pre-payments.

Say, for example, you have a $400,000 mortgage at 3.49%, amortized over 30 years (a typical mortgage today). Your monthly payments are $1,788.35, and in 30 years you’ll be mortgage free, (assuming the rate doesn’t change in that time period, which it will, but for argument’s sake, it stays steady)

In the five year term of the mortgage, you’ll pay off $41,428,60 from your Principal, and $65,872.40 in Interest
Now, you find an extra $100 (one hundred) dollars per month, and add it as an Extra Payment on your mortgage. Congratulations, you just took 2.58 YEARS off your mortgage, saving you $24,373.41 in INTEREST! (Disclaimer: this does assume your mortgage rate will stay the same the whole time, which it won’t, but the principle applies nonetheless)
With an extra $100/month, In the five year term of the mortgage, you’ll pay off $47,969.41 from your Principal, and $65,331.59 in Interest. That’s an EXTRA $6,540.81 Paid OFF, and about $500 less interest paid.

How are YOU going to find $100 extra per month? Let us know

Alexx

Filed Under: For Buyers, For Sellers, Homeowner Tips, Mortgage News

Bank of Canada increases rate to 0.5% (June 1, 2010)

June 1, 2010 (Tuesday) By Alexx

As expected, the Bank of Canada increased their overnight rate by a quarter of a percentage point to 0.5%, with the intention of bringing the market to a more normal functioning level.

The Bank of Canada has raised its key interest rate to 0.5 per cent, moving it up from the rock-bottom low of 0.25 per cent set in April 2009. The central bank says its decision to raise rates still leaves considerable monetary stimulus in place. Rates were lowered to their lowest practicable level in April 2009 to help encourage spending during the recession and to prepare the country to deal with economic hard times. The decision to raise rates will affect financial vehicles such as variable rate mortgages and lines of credit tied to the prime rate. It’s expected to be the first in a series of moves to move rates away from ultra-low levels as the economy improves.

This is a good thing for the economy and its sustainability. Interest rates as far as mortgages and lending are concerned are still so low, that it should not affect home ownership.

Read their full press release here: http://www.bankofcanada.ca/en/fixed-dates/2010/rate_010610.html

Filed Under: For Buyers, For Sellers, General Information, In the news, Mortgage News

Mortgage rate hikes expected: poll

March 29, 2010 (Monday) By Alexx

An interesting read from the CBC. If you have any questions on how this may impact the sale or purchase of your next home, please contact me and we can discuss your situation, and how exactly an interest rate increase (hike is a bit of a stretch word I think) will affect your cost of living. – Alexx

“64 per cent of those polled believe that mortgage rates to rise

Most Canadians expect higher mortgage rates this year, according to a survey released Wednesday by the Royal Bank.

RBC’s annual home ownership survey found 64 per cent of those polled expected the cost of a mortgage to grow, with the same number concerned about

that prospect.”

Filed Under: For Buyers, In the news, Mortgage News

Bank of Canada maintains overnight rate target at 1/4 per cent

October 20, 2009 (Tuesday) By Alexx

Bank of Canada maintains overnight rate target at 1/4 per cent and reiterates conditional commitment to hold current policy rate until the end of the second quarter of 2010

OTTAWA – The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent.

Filed Under: For Buyers, Mortgage News

Don’t handcuff your mortgage

June 14, 2009 (Sunday) By Alexx

Would you like to pay an extra $300 per month on your mortgage? Not likely.

That hasn’t stopped a number of Canadians, with the deal of a lifetime on a variable-rate mortgage, from switching over to a more expensive fixed-rate product and paying the extra freight.

Read the full article on the Financial Post website:

http://www.financialpost.com/story.html?id=1691448&p=1

Filed Under: Article Link, In the news, Mortgage News