Take Control of Your Mortgage and Reap the Rewards

nathanIt can be a stressful period, with much at stake, so once it’s secured it’s tempting to tuck it away safely and not have to worry about it.

It’s an approach that’s likely to be reinforced by recent headlines suggesting the housing market in Canada is overheating or that values are in danger of falling. However, while caution is perfectly understandable, there’s a danger that the perception of safety could end up costing you thousands of dollars.

Mixed Messages Don’t Help
When an influential online publication like The Huffington Post, quotes a Reuters poll of 16 housing experts “almost all of them worried that prices could fall”, people tend to take notice. When that’s reinforced by TD Bank economists saying the Canadian market might be overvalued by 10% or more, the common approach is likely to be a careful one.

Yet look beyond the attention-grabbing headlines and the details reveal a somewhat different story. Of the 16 experts mentioned, 8 were only “slightly concerned” and 3 not at all. None felt capable of predicting when a fall might occur and in fact most expected Canada property values to rise a couple of percent over the next twelve months. The truth behind the bankers’ quote is that homes might be overvalued if interest rates rise – but if they stay the same, property could be as much as 6% undervalued.

How ordinary people are supposed to make any sense out of these kind of news stories is difficult to see. Fortunately, Canadians have much more reliable sources for mortgage broker advice than the confusing messages coming from so-called broker experts.

If you’re looking for cold, hard facts about property in Canada, then authority sites like CREA – The Canadian Real Estate Association – publish regular updates about the number of homes that are selling and the prices they’re making.

If you’re considering buying a new home, it’s the sort of factual information that can have a bearing – but moving is far from the only reason to be reviewing your mortgage.

Active Management Means Money in Your Pocket
Many home owners will have enjoyed a considerable increase in the value of their property in recent years. They will have a positive equity position (what they owe on their house is considerably less than its value) and affordable mortgage repayments. It sounds like an enviable position – one that’s best left well alone.

Or is it?
Most people’s view of their mortgage is that so long as they can afford the repayments, everything’s good. OK, so it’s not a bad position to be in, but how much could a 1% reduction in interest save you? How much might you save if you could increase payments by, for example, $50 a month? How much quicker could you pay your mortgage off?

When you start looking at the detail, you can come up with some surprising figures. Many people are loathe to consider change, happier with the status quo, but they could be missing the opportunity to save thousands of dollars, or several years of repayments, or both – and for relatively minor extra input.

Then there are other ways that changing your mortgage might have a considerable impact on your lifestyle. Perhaps you don’t want to move but you’d like to make some improvements. Entrepreneurs might free up some of that equity to help their business. Others could use the money to get themselves out of a financial difficulty. Whatever reason, if you’re considering a sizable loan, a mortgage usually offers much lower rates than a bank.

It’s understandable that people are cautious when it comes to their mortgage, but the fact is it’s a loan like any other. Yes there are potential penalties and fees to consider, but why shouldn’t you shop around for a better deal?

 Competitive Market Puts You in Control
With the exception of a brief period from mid-2009 to mid-2010, Canadian mortgages are as cheap as they have been since before the 1930s. At the moment, the market is highly competitive. If you have a good borrowing record there are plenty of companies fighting for your business. Visit a leading mortgage comparison sites and you’ll find a tremendous range of offers, updated on a daily basis so you always have precise detail at your fingertips.

Property in Canada was insulated from much of the mayhem in other countries, in part because of sensible lending management and rules that went a long way to preventing excessive debt. As we look forward, the future of the housing market may be difficult to predict but smart homeowners are taking advantage of the current lending climate and adopting a proactive approach that can make them a good deal better off today, and for years to come.