We have passed through the first month of 2017. Can you believe it? We all know that the new year is a time for making personal resolutions, evaluating your involvement in memberships and affiliations, writing business plans, and getting back on track with health and fitness. It is also a great time to do a mortgage checkup, and make sure your mortgage is working for you the way it should be.
A mortgage isn’t something you sign once every few years and then forget about during the time in between. Life and circumstances can change substantially in a year, and a regular review can help ensure that your mortgage is still the right fit for your lifestyle and your situation.
The types of things you should look at when conducting your new year mortgage checkup are:
1. Interest rate;
2. Payments and other mortgage terms;
3. Available home equity;
4. Life changes that have occurred over the last 12 months;
5. Have your mortgage goals changed?
Why is a new year mortgage checkup important? That’s simple. Aligning your mortgage strategy with your current mortgage goals can help you:
1. Get Mortgage Free Faster: If you receive extra cash like an inheritance, tax refund or a work bonus, think about putting it toward your mortgage. Every extra dollar you pay down on your mortgage saves you money in interest and knocks time off your amortization.
2. Reduce Your Monthly Payment: Negotiating for a lower interest rate allows you to lower your payments and use those extra dollars to improve cash flow or build a rainy-day fund.
3. Consolidate Your Debts: Transferring high-cost consumer debt like a credit card balance to a lower interest rate by consolidating it into your mortgage can help you boost your cash flow to build up a savings account. It can also help you pay down your debt faster while saving money in interest.
4. Trade Your Equity Temporarily for a Home Equity Line of Credit (HELOC): A Home Equity Line of Credit can help you access lower-cost funds so you can top up your investments or TFSA contribution for the year. It can also help you pay for renovations, vacations, or even free up funds you can gift to your kids or grandkids for a down payment on their own first home. These lines of credit can be paid down with flexible terms, and there is typically no penalty to pay them off entirely at any time.
5. Improve Your Credit Score: Having a strong credit score increases the number of options available to you when it comes to borrowing money. Generally, the stronger your credit score, the lower interest you pay when you borrow money, therefore reducing your total cost of borrowing.
All, some, or none of the above options may be a fit for your family. There can certainly be pros and cons to each of the above options depending on your unique circumstance, but knowing what these options are puts you at an advantage if you ever need to make changes to your financial strategy.
A key part of educating our clients and building positive relationships with them is working with them through the entire mortgage process, while assessing their lifestyle and understanding their goals. Helping them to get mortgage ready, stay mortgage balanced, and ultimately get mortgage free faster is our business.
In some cases, a mortgage checkup may show that refinancing could improve your mortgage strategy. In other cases, the best plan of action may be no action at all. If you’d like some help figuring what options might be best for you, contact us today!