Multi Part Mortgages

One of the things I see is people with a mortgage at a bank and it sits in multiple pieces, different amounts at different rates, maturing over the next 1 - 5 years.  In a recent case I think they had 5 or 6 components.  There was the ever present Line of Credit (LOC) and then a variable and 4 fixed rates.  Sort of cool in the sense that it diversifies your debts over time and you are not subject to renegotiating it all at the same time when rates are high.  Conversely, you are not able to renegotiate when rates are at record lows.
This client was definitely in need of an overhaul and there was tons of room for savings even with the penalty factored in.  Without doing the work it is hard to know if making the change is a good choice or not.  I would never advocate change that is not beneficial, but I am a big advocate for checking out your options.
If you are not into absorbing any sort of penalty regardless of the savings, then at least make an effort to renew each segment so that it next come due at about the same time as other segments and eventually the goal would be to have them all on the same schedule.
This helps in 2 way

1. You are renewing at shorter terms which are often cheaper and if you maintain the same payment level you are paying the debt down faster
2. Eventually everything comes due at the same time and you can now stand on a stronger footing with your bank when negotiating rates, because the penalties are no longer holding you back from leaving and getting a better deal elsewhere.

If you could save $20,000 dollars over the next 5 years would it be worth sitting down for an evening and doing the math?  Or call me and see if I can help you find options that suit you better.

Financial Review - Your Mortgage is part of a bigger plan

My focus is mortgages, but when I am discussing mortgage options with clients I also need to discuss or inquire about other aspects of their financial goals. 

• Do they need to increase cash flow in the short term to get a car paid off or a credit card paid down faster?  
• Do they need to consider refinancing in order to consolidate debt?  
• Are they thinking of moving or renovating in the next 1 - 5 years?  

If the answer is yes to any of these questions, or others, then we need to rethink what type of mortgage would best suit them.  They might need a loan where they can increase payment easily once the car or credit card is paid off.  They may need to go for a shorter term because they are planning to move in 3 years, or are considering it.  They may be considering a renovation and the current interest rates and home improvement incentives might move the plans up on the agenda so they may opt to refinance now and get started on the home improvements sooner and so they can enjoy the home they dream of.

There are so many things that can change in our lives every year and each one affects our finances, it might be more money available and what to do with it, or it might be a new purchase that costs a bit more than expected.   

I will not tell you how to invest your money, I am not licensed for that, but I can help you plan out options and how your mortgage fits in to those plans.  Whether it is using RRSP refunds to pay down debt or mortgage, or using funds to by an investment property rather than deal with the stock markets, mortgage financing is a very cheap way right now to achieve your goals.

I am not a big advocate for digging a bigger debt hole, but I do think there are times when using the equity in your house for something that has a real value or long term benefit may be worth exploring.  If we do it right you may even be debt free faster.  Getting the debt in the right place and making it as cheap as possible can help manage your money in a way that will set you up for the long run.

There are so many questions that people need to ask themselves before they sign the mortgage renewal form or go blindly out looking for "the best rate."  A home is a place to live and an investment, make sure it is working for you from every angle.