Are you "on pause" until interest rates start to rise?
When rates begin to nudge up, will you scramble to gain every 1/4% you can when renewing your existing mortgage? Or, will you hit the open-house circuit at a run, searching for a new home or your first real estate, so you can squeeze into the largest-possible mortgage before rate increases shut you out?
"Last minute" is how we do many things financial - income tax, registered retirement savings plans, investing, credit card debt, student loans, wills, succession planning….
How's that "don't think ahead" strategy working for you? Has it saved you money, gotten you the best deals, and kept you out of the 164%-household debt category?
The business of life is a reality.
- Either invest time and effort learning how to beat the system that feeds off consumers, so you can consistently come out ahead and enjoy life, or
- Suffer the consequences as part of the 99% of income earners who matter less and less to governments, corporations, banks, and other groups that are expensive to deal with.
Are you really too busy with your smartphone, reality shows, Facebook, or your home theatre to invest time in your financial future? This is not about being filthy rich—just having enough money to give you choice, whatever the future throws at you. Leave this 'til the last minute and you may have a future focused on searching for enough money.
So, back to mortgage renewal… This is a great example of how to think smart and keep more of what you make and spend less of what you don't have. Interest rates have been low for ages, and can't get much lower. But they can and will go up. Banks can, and have, raised mortgage rates before the Bank of Canada has made a move. Expect more of this as there is just too much proft-driving mortgage debt and potential mortgage debt from first-time buyers for lenders to hold off raising rates, adding fees, and cashing in. Mortgage borrowing rules keep changing, but not in favour of consumers. Yes, the government makes changes "for our own good" - to protect us from our selves we're told - but scrape the surface and benefits seem directed elsewhere. Contributions from Financial Literacy initiatives are not evident on a grand scale yet, but there's an ongoing consumer-protection theme in media, online and off, that is encouraging. For example, the Friday, January 25, 2013 episode #15 of CBC's Marketplace concentrated on "Busting the Banks" and included a segment - "collateral damage" - on the more-restrictive collateral mortgages and stirred up some controversy. (The other items in the program may be eye-openers for you, too.) My suggestions? Watch this episode. Then learn what mortgage brokers say to each other about this Marketplace episode and how consumers are treated when it comes to renewal rights and related issues. The comments and candour of CanadianMortgageTrends.com bloggers and mortgage brokers Melanie & Rob McLister and their contributors makes captivating reading for "outsiders" like most consumers. Let us know what you think. Check your mortgage document (or have the lender show you where the explanations are) and find out what restrictions and advantages exist for you on renewal. Can you shop around for the best rate and terms, or do you have a collateral mortgage which restricts your choices? Then talk to mortgage brokers and see what they say your choices are.
What you don't know will come back to bite you since consumers only win when they and their independent advisors are vigilant. For instance, lines of credit can be easier to arrange and to manage than traditional mortgages, but the lender retains the right to end the line of credit under a set of circumstances which may not suit your plans. Many property owners were caught off guard when their lines of credit were reduced after age 65 or after an income drop. While specified in the contract, borrowers did not know this set of lender rights existed.
- These financial professionals have the knowledge and contacts to offer a range of choices across a variety of lenders. They are trained to analyze alternatives and demonstrate benefits and pitfalls, so you can make informed choices. Disclosure of conflict of interest is an essential standard.
- When you go to the bank, you are told what bank employees are told to tell you, and sold what the bank has to sell. Your choice really lies in where you get your information and who you decide to have work in your best interest.
Where will you go from here? Ready to push the pause button to start the real action? Remember, this is action - preparing, not waiting - to learn what your options are, not a rush to "last minute" re-action.