Header Penalites Explained

 

We have some very competitive and exceptional interest rates right now. For a new applicant, it's a great time to shop around. If you already have a mortgage, we need to balance out the penalties to switch your mortgage in order to determine if it's worthwhile in the long run.

Let's look at penalties based on the type of mortgage and how they work.

 

Fixed Rate Mortgage

The penalty is the greater of Interest Rate Differential (IRD) OR 3 months interest. Interest Rate Differential is the difference between your interest rate and the best they can lend someone else now - so they want the difference.  This is determined by how much time is left in your term and the going rate.  If the going rate is higher than your rate, you're in luck. They will say goodbye with less of a penalty because they can replace you with another mortgage at a higher rate.  However, if you have 4 years left in the term and the going rate is lower, they will likely charge you a higher penalty.

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It's not easy to save money - that is the honest truth. And it certainly isn't easy to save in big amounts. But it doesn't mean we can't make an effort to save small amounts in our daily routines.  Here are 3 ways to put some dollars back into your pocket ... or into a savings account.

 

Be Deal-Savvy

But not an impulse deal buyer!  We are often lured by ads that indicate 60% off or best price ever.  Make sure you shop around! With online shopping being easy, stay focused on what you NEED and don't be tempted by other deals.

Think about programs like Rakuten to earn dollars back from purchases. Try apps like Checkout51 for online coupon savings. And try FLIPP for sales flyers and finding the best sale prices on items you need! There are many others, take advantage of them if they are already part of your shopping sites.

 


Take a Sledgehammer to Your Food Bill

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I like to review all the payment options for mortgage plans because they each have their benefits and it's important to choose the plan that works best for you. When it comes to accelerated vs. regular (non-accelerated), it's fair to say that accelerated will save you money in the long run. Here's how it works:

 

Accelerated Payment Schedule

  • The monthly payment is divided by 2 (bi-weekly) or by 4 (weekly).
  • There are 52 weeks in a calendar year so if you make 26 bi-weekly payments, you are in effect paying your Lender the equivalent of 13 months of payments per year compared to 12 months payments in a regular repayment plan.
  • This accelerated repayment of principal is what shortens your amortization.
  • 13 monthly payments ÷ 26 = accelerated bi-weekly payment
  • Example: ($449.96 per month x 13 months) ÷ 26 = $224.98 accelerated bi-weekly payment

BoC Header

I want to wish you a very Happy Spring and hope that everyone and their families are staying safe during this tough time for our country and the world. Keep your spirits bright, this is only one season of life that we need to walk through and we will all come out of this stronger on the other side. 

As you know, your variable rate mortgage, line of credit and/or student loans are all based on the Prime Rate and here is your personal update from me on the recent Bank of Canada announcement.

As of 10AM on April 15, 2020 the Bank of Canada has maintained their Overnight Rate. After seeing multiple rate drops in the last month it is not a surprise that the Bank held their course this time. The good news is that you are still benefitting from those rate drops from earlier this month and continuing to save unnecessary interest! 

Where We Are Right Now

The outlook unfortunately is not looking very rosy for either the Canadian or Global economy. Most industries have been brought to a complete standstill and Canadians are facing unprecedented job loss numbers and decreased spending across the board. Our prediction is that rates are going to likely remain low for quite some time as the government comes out of this crisis and attempts to stimulate the economy.

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1. Accept where you are.

Denying debt is a dangerous thing. Rule your money or your money will rule you. You have to accept the position you are in and begin taking ownership of your finances. There is no shame in debt and by no means are you alone. This pandemic is hurting a lot of people - accept it, take ownership, be proactive.

 

2. Track every penny you spend.

Before you can even think of a new a budget, you need to know your numbers. Track every penny you spend for a month. Within 30 days you will know how much you spend on food shopping, utility bills, takeout, and so on. Knowledge is power. You can't make changes or know where your money is going if you don't track it.

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