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April 2009
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Vol 2, Issue 4
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Home Sense
By Pauline Tonkin
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Greetings!
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I receive many calls from people who are making tough choices during these challenging economic times. Financial security for you and your family is at the top of the priority list. To offset the risk, some people are taking a serious look at their existing mortgage and other financial matters to ensure they are in a solid place for the next 3-10 years.
This newsletter was created to share information regarding all kinds of money matters, from understanding mortgage financing to ideas on how to save and even make more money for you and your family. I will continue to include mortgage strategies, budgeting tips and other information that I hope you will find a valuable resource over the coming year.
Feel free to forward this to those you care about - sharing is a good thing! Remember - my phone is always on - call me anytime - no obligation. I am happy to help in any way I can.
Visit my blog (www.mymortgagebroker.wordpress.com) for regular updates on economic news and financial matters.
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Mortgage Strategies - Keeping it simple
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If you knew you could get a better rate of return on your money, reduce your tax bill and have somebody else help pay for your retirement what would you do? I thought so! - Read on...
That is exactly the advantage some homeowners are considering with the drop in real estate prices and record low interest rates.
For others, who are
trimming their budget and may not want to contribute to their RRSP each
month but still want to invest for their retirement, this is an option
to consider.
For example, John and Sue own a home in Vancouver. The home is tax assessed at $600,000 and the mortgage (maturing in 3 years) has a balance of $250,000. They also have a secured line of credit on the house open for $100,000 that they have never used - so they can borrow up to $100,000 if they need it. They want to purchase a rental condo but don't want to refinance their existing mortgage as they have a good rate and don't want to pay a penalty to close the mortgage early.
Solution: John and Sue use $44,000 (20%) from their line of credit as a down payment to purchase a two-bedroom condo in Burnaby for $220,000. By making a 20% down payment they avoid the higher CMHC insurance fees for rental purchase (up to 6%). Monthly interest payments on the $44,000 (at P+1% or 3.5%) are $127.41. The first mortgage on the condo would be $176,000 with payments of $924.84 based on a 5-year fixed at 3.99% and 25 year amortization. Total monthly cost is $1052.25 (property taxes and strata fees of approximately $350 are additional). With a strong rental market this condo can be rented for $1300-$1500 making this a investment that pays for itself. By setting up their rental payments in a tax efficient way, John and Sue are also able to pay down the mortgage on their own home sooner. They can also report all expenses including interest costs for the condo on their personal tax return. For details on this strategy, please give me a call anytime.
Also, check with your accountant for details on tax benefit regarding investment properties.
This is just an example. Each situation will vary. Call me anytime to run the numbers for your specific situation. |
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Budget Tip
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If
you are considering ways to lower your monthly expenses and increasing your energy efficiency within your
home, now is a great time. The Federal budget includes homeowner tax
incentives to do just that.
Consider this. Mark, a Toronto
resident needed to update his 25 year old furnace. After looking into
the tax credit he decided to invest
$9,000 in a furnace, attic insulation, a tankless hot water heater and
air
conditioner and qualified for $3,200 in rebates from the provincial
and federal governments. Now his energy bills are 30% less than
before.
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Mortgage Tip
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If you have 20 years left on your existing mortgage - can you pay it off in half the time?
Yes!
It varies for everyone depending on your mortgage - but, by taking advantage of low interest rates your payments could be much lower than they are now. Then, by increasing your payments by as little as 5-10% each month and making one extra payment each year - you can drastically reduce your amortization.
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Choosing the right mortgage makes sense not only cents
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Courtesy of Ray Turchansky, Canwest News
Service Published: Monday, March 30,
2009 FP Mortgages-Special Report
Traditionally, the most important consideration in choosing
a fixed or variable mortgage has been which strategy would save the most money.
But that might no longer be the
case: Choosing a type of mortgage and term today may come
down to what makes sense for the individual homeowner rather than what saves cents.
"If you were buying a house 10 years ago, fixed
versus variable was the biggest decision you made," says Moshe Milevsky,
finance professor at Toronto's York University
and executive director of the Individual Finance and Insurance Decisions
Centre. "But now there are more important things in place. Equity prices
are falling, housing prices are falling. I think there are three or four things
more important than fixed versus variable now."
Mr. Milevsky's 2001 study of five-year rolling
interest rates from 1950 to 1999 showed that 88.6% of the time, homeowners
would have been better off with floating or short-term mortgages rather than
five-year, fixed-rate mortgages, saving an average of $22,000 on a $100,000
mortgage amortized over 15 years.
"The last time I looked at it, a year ago, the
same strategy was holding up. Roughly ... 85% of the time, you were better off
going with variable rates, rather than fixed rates."
Another, lesser consideration was peace of mind: New
homebuyers might sleep better when essentially paying an insurance premium as
part of locking-in payments for five years.
But saving a few dollars should no
longer be the determining factor in the fixed-variable dilemma.
To view the complete article, visit my blog at www.mymortgagebroker.wordpress.com.
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Free Seminar - To Finance and Protect - Presented by Pauline Tonkin
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Join myself and Margaret Reynolds of Wealth Management as we provide you some clarity when it comes to your mortgage and/or reviewing the many options to protect your assets. We will give you some food for thought and answer all your burning questions. No high pressure sales and no-obligation. Only free advice!
When: Thursday April 23, 2009 Doors open at 6:30 pm. Interactive presentation from 7-8:30pm
Where: 519 Seventh St, New Westminster
Please RSVP to Pauline at 604 813 8402 or tonkin.p@mortgagecentre.com. Bring a friend!
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I hope you find this newsletter informative. If you feel it is of value, please forward to your friends and family. I welcome new subscribers and more ideas for content. By sharing strategies and tips - we can all make the most of our money.
Sincerely,
Pauline Tonkin
Your Trusted Mortgage Specialist
Elder Mortgage - The Mortgage Centre
101-566 Lougheed Highway, Coquitlam, BCV3K 3S3
P: 604 931 4719
C: 604 813 8402
www.mybcmortgage.ca
www.mymortgagebroker.wordpress.com
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Pauline's Pick - www.craigcarmichael.com
We aren't all home decorators. I have found that pictures can be an affordable option and make all the difference. My friend and colleague, Craig Carmichael is an amazing local photographer. With a few well placed photographs you can update the look in your home and save a lot of money on major decorating.
For more information, visit his website and view some of his work. You can even order online!
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