Paying attention to your financial health
While about 80 per cent of Canadians visit a doctor at least once a year to maintain their physical health, far fewer people update the health of their mortgage.
As is the case with your own health, a lot can change in a year with a mortgage, something most of us have signed up for five year renewals.
Many things can affect your mortgage situation—career change, kids leaving home, retirement, inherited money.
Managing your financial lifestyle is just as important as managing your diet and exercise.
Too many people often sign off on a mortgage renewal without reviewing their financial situation.
Consumers tend to become complacent about their mortgage payments when the possibility to save money on those payments may get overlooked.
Homeowners should annually review three things—their current and expected future financial risk profile, net income and current mortgage rates.
If you see interest rates going up, lock into a fixed rate if you have a variable mortgage rate.
If the rates drop, consider the benefits of refinancing.
To make a commitment to be mortgage free in 25 years, take a longer view outlook of what interest rates will look like over that period of time and find a comfort level with the payments you will be facing.
Even something such as making home renovations could affect the type of mortgage that works best for you.
For example, topping up or refinancing an existing mortgage can pay for those renovations, providing you’re comfortable with a blended interest rate.
If you buy a new home, you may be able to port your current mortgage to the new house.
Or, maybe you just want to consolidate higher interest unsecured debt into your mortgage, saving on high interest costs and getting out of debt sooner.
A mortgage can also offer tax efficiency benefits if you’re thinking of investing in a business, buying a rental property or putting some money into mutual funds or the stock market.
That’s because the interest paid on money borrowed on a principal property can be written off against revenue from those investments.
But the biggest reason for making changes to your mortgage mid-stream is because it could be a lot easier to do something before your financial situation changes. Making changes to your mortgage before you go into a new venture or before you retire will allow you to qualify much easier rather than waiting for your mortgage to come up for renewal.