Three Ways to Pay Off Your Mortgage Faster!

Stretching out your mortgage over as long a period as possible may keep your payments down and help your short-term cash flow. But it will also put off the day you’ll be able to use that money for something else – and may even cost you more in the long run. Here are some ways you can own your home sooner:

1. Pay more than the minimum

Let’s say your mortgage is $1,000 a month but you can comfortably afford to spend another $200. Doing so will reduce the amount of interest you pay and save you years of mortgage payments.  Pay what you are comfortable paying and not just make minimum payments.  Doing so will allow you to be debt-free more quickly.

With interest rates at low levels today, any increased mortgage payment will have a larger portion of the payment go towards the principal.

Renewing your mortgage at a lower interest rate? Don’t lower your mortgage payments. Keeping your payment the same amount or even raising it contributes significantly to the acceleration of your mortgage. You initially qualified at that amount so you can afford it.

2. Make a lump-sum payment every year

This could be your tax refund, your annual bonus or any windfall that falls into your lap. Even an increase to your mortgage payment of $25 to $30 will result in significant time taken off your mortgage repayments.

Most mortgages provide privileges that allow you to make additional payments per year, usually between 10% and 20%. Make sure to confirm these particulars before signing a new mortgage agreement. These prepayment options are important if you are committed to paying off your mortgage quickly.

Making lump-sum payments to the nearest thousand. Let’s say you have $195,320 left on your mortgage: You’d make a payment of $320 to bring it down to an even $195,000 which over the long term can reduce your amount of mortgage payments and interest.

3. Make accelerated biweekly payments

What’s better: paying $1,000 a month or $500 every two weeks? The latter strategy comes out ahead. For a truly accelerated program, divide your monthly mortgage payment in half and make that payment every two weeks. This means you’re ultimately making 26 half-payments in a year, the equivalent of one full additional monthly payment. The 13^th payment is the accelerant. It allows you to get that mortgage paid down faster.

Paying frequency may not seem like a big deal but check out this example: The Smiths have a $200,000 mortgage at 6% and are paying $1,280 in monthly payments. If the interest rate and their payments remain the same, their mortgage will be paid off in 25 years.

Compare this to the Browns, who have the same $200,000 mortgage and 6% interest rate. They chose to pay $640 in accelerated biweekly payments. If they keep this up, it will only take them 21 years (four years less than the Smiths) to pay off their mortgage. In the process, they will also save $35,000 in interest payments.

Whether you’re taking out your first mortgage or renewing an existing one, these strategies can help you kick your mortgage to the curb years sooner.


Original source: Three ways to pay off your mortgage faster by Deanne Gage for BrighterLife.ca.

Why the Bank of Canada likely won’t change its ‘neutral’ stance despite improving economy

Early signs of an economy moving toward full economic health probably won’t be enough to prompt Bank of Canada Governor Stephen Poloz to alter the stance of monetary policy Wednesday.

The target for overnight loans between commercial banks will remain 1% for a 29th meeting in a decision at 10 a.m. New York time, according to all 18 economists surveyed by Bloomberg News. Poloz will speak to reporters from Toronto 30 minutes later.

Poloz has said he’s “neutral” about the next policy move and last week highlighted the risks posed by persistently slow inflation. Wednesday’s statement will maintain that message, even after stronger-than-expected data and price gains exceeded the bank’s last quarterly forecast, said CIBC World Markets economist Peter Buchanan.

 

“Lowflation” has been the bank’s major concern, Buchanan said. “Too candid a recognition that deflation is less of a threat could see unwanted upward pressure on the currency,” he said, which could crimp export growth.

Poloz sets interest rates aiming inflation at the 2% midpoint of a 1% to 3% target band. The annual inflation rate slowed to 1.1% in February from 1.5% the month before, Statistics Canada reported March 21. Data for March are scheduled to be published April 17, with economists surveyed by Bloomberg forecasting a 1.4% rate.

 

While price increases have been stronger than 0.9% the central bank forecast in January, “it’s unlikely the Bank of Canada will fully back off their inflation concerns,” said Benjamin Reitzes, a senior economist at BMO Capital Markets in Toronto.

Other Improvements

Other economic indicators have shown improvement in the world’s 11th-largest economy. Canadian employment surged in March, climbing almost twice as fast as economists forecast with 42,900 new jobs, and gross domestic product rebounded with a 0.5% gain in January. Factory sales in February jumped 1.4%, to reach the highest level since 2008 before the last recession.

The consumer-price index in the U.S. rose 1.5% in March from a year earlier, a Labor Department report showed yesterday in Washington, which may alleviate concerns about too- low inflation among Federal Reserve policy markers.

The Canadian dollar declined 5.4% in the last six months through Wednesday, the second-weakest performance after South Africa’s rand among the 16 major currencies tracked by Bloomberg, as Poloz shifted to a neutral policy stance. The weaker dollar may help boost inflation by making imports more expensive, as well as boosting exports, three-quarters of which are bound for the U.S.

Growth Rotation

Policy makers have been counting on a rotation of growth to exports and business spending from indebted consumers. The International Monetary Fund said last week that shift hasn’t yet emerged and said monetary policy should remain stimulative.

Canada may still benefit from demand for exported commodities and the weaker currency according to some executives.

“The drop in the Canadian dollar relative to the U.S. dollar fundamentally helps our business,” Don Althoff, Chief Executive Officer of Calgary-based pipeline operator Veresen Inc., said in an April 11 telephone interview.
Bloomberg.com

 

Bidding Wars.....An Easy Fix?

Article written by Boris Bozic on the 28 Mar 2014 in Mortgage

I wonder if purchasers who went through the bidding process would do it over again?   We’ve all made bad business decisions, it happens.  But if the purchaser feels like they were played, well, that’s not good for any of us.  The integrity of the real estate sales process is sacrosanct.

I assumed that real estate bidding wars was specific to pockets in the Vancouver and Toronto market place.  You know? Big home values, big incomes – the bigger-better syndrome.  Alas, my assumptions were incorrect.  I made a stop in Winnipeg a few weeks ago to meet with some of our broker supporters, and I was surprised to hear how prevalent bidding wars are in the Winnipeg market place.  I guess I shouldn’t be surprised, given the Globe ran article recently about what to do if you find yourself in a bidding war.  People on the front lines are talking about it, and Canada’s self-proclaimed National newspaper is providing advice on what to do if you find yourself in real estate auction.  I’ll assume that real estate bidding wars are no longer a one off or the exclusive domain of larger urban centers.

Should we care? I think we should.
Some would describe real estate bidding wars as the free market economy at work- a willing seller and a willing buyer.  The flip side of the definition is; the manipulation of the real estate process, predicated on an unsuspecting and uniformed buyer.  An argument can be made for both definitions.  Here’s where I stand -

 

I think it’s an unseemly practice, and should be stopped or at the very least an attempt should be made to curtail it.  Here’s how it works, the real estate agent convinces the vendor to list their property for slightly less than market value.  The listing states that no offers will be entertained for a period of time, somewhere between five to seven days.  Enough time is given to view the property, and hope that perspective purchasers, especially those who are frustrated and disillusioned because they’ve done this a number of times and have no home to show for it, will submit an offer on the prescribed date.  The hope is the offer will be based on emotion, excuse me…market reality, and over pay.  And that’s what’s happening with greater frequency today.  I often wonder if purchasers who went through this process could do it over again, would they?  We’ve all made bad business decisions, it happens.  But if the purchaser feels like they were played, well, that’s not good for any of us.  The integrity of the real estate sales process is sacrosanct.

 

The best way to ensure that the integrity of the real estate sales process is not questioned is by way of transparency.  The Competition Bureau’s attempt to have CREA (Canadian Real Estate Association) publish the historical sale price for the listed property, is a step in the right direction.  CREA is fighting this because of “privacy” legislation. I find that interesting given that the information is already public, and one can find it if they have the time, and know where to look.  Finding historical sales data shouldn’t be laborious or treated as tradecraft.  We live in an age of instant information, and there’s no conceivable reason not provide this information to purchasers, and existing home owners.  If you want an example of how this can work, go to Zillow.com.  On this website is the listing of every property there is for sale in the U.S. It also provides estimated property evaluation, and historical sales activity for all properties.  It would be a valuable tool for anyone finding themselves in a bidding war.  If a realtor councils perspective purchasers to go in at “x” dollars, the council can be judged and validated as quickly as the purchaser can tap his/her tablet.  Transparency and information assists the purchaser to make a better decision.  A home is shelter, it’s also the biggest single investment decision that most people will make in their lifetime. 

There’s a self-serving reason why I would like to see theses bidding wars come to an end.  If the purchase price of the home is over market value, the appraisal is not going to come in.  That’s the point when everyone who was party to the over inflated purchase price runs for the hills, and start blaming those who are left to try and fix it, the mortgage broker and lender.  Rather unjust.

Oh yeah, my quick-fix solution is this, the mortgage amount is based on the purchase price or appraised value, whichever is lower.  We should add the listing to that as well.  That would pretty much end the gaming of perspective purchasers.