In Brampton, Toronto and the GTA we keep talking about the housing market! Are we in a housing bubble, will rates rise in 2022 and by how much, which is better fixed or variable, is this the right time to buy or refinance, and on and on! Heading into 2022 it feels like some uncertain times ahead, but often it’s just a few sensible strategies that can help you thrive in the current climate. To help you stay focused so you can achieve your long-term goals, here are my top tips for the year ahead:
- Deal with your holiday debt. Many Canadians can go a little overboard financially during the holiday season. Often, we can spend less over the next few months to pay everything off and catch up. But sometimes you reach a point where your credit card balance is more than you can handle, especially if you have other loans. This is when I encourage you to get in touch to discuss how you may be able to roll that debt into a low-rate mortgage with one manageable payment. The right debt consolidation strategy could save you thousands, give you much needed breathing room, and put you on the right financial path.
- Take care of your credit. It’s so important that you have good credit behaviours so you can qualify for the best rate when you need a new mortgage. Always, always pay your bills on time, this is the single most important factor behind a good credit score. Don’t let each of your credit accounts exceed 30% of the credit available. Before you cancel any credit cards, get advice. And don’t apply for a store card just to save on your purchase that day!
- Get advice before locking in your variable mortgage. With the prime rate expected to start climbing in 2022, keep in mind that it will take several prime rate increases for variable rates to be on par with a fixed rate, and you are likely better off sticking with your original strategy of focusing on payment vs. rate. Get in touch if you want to discuss the best strategy for your situation. It’s important to be always confident in your mortgage plan.
- Consider if a refinance make sense. Whatever your need might be – getting a lower mortgage rate, paying down that high-interest debt, renovations, investing in the future through a second home or business, helping a child buy a home, you may want to look at refinancing your mortgage and taking advantage of low rates that likely won’t be around too much longer. I can complete an analysis to help you determine whether this strategy makes sense for you at this time.
- Speed up your mortgage pay-down. Change from monthly payments to accelerated weekly or accelerated biweekly, which increases your number of payments and takes years off your mortgage. Also consider putting found money like raises and tax refunds against your mortgage principal. Check your mortgage contract for the amount you can prepay each year. Given the potential for higher rates in the coming year, this is a great way to prepare. If you can increase your payment amount, you’ll be accustomed to paying the higher amount should rates be higher at renewal.
- Renew with your eyes open. When your lender sends out a letter suggesting you renew your mortgage at their current offer, that’s a signal to get in touch. This is an important moment of opportunity to negotiate the best possible deal and I will do all the work for you!
- Get a pre-approval. A preapproval is important for most mortgage shoppers. It will tell you how much you qualify for, what your mortgage payments will be, and you’ll get an interest rate that will be held for up to 120 days so you are protected should rates rise. If you are house shopping, you won’t fall in love with a home you can’t afford, and you can act quickly when you find your dream home. Pre-approvals also make sense for renewals and refinances when rates are rising.
- Remember the devil is in the details. If you are thinking fixed rate, you can save thousands by making sure you get a mortgage that has a fair prepayment penalty. Unless you are confident that you’ll stay in your mortgage for the full 5 years, you need to consider this because the fees to get out of your mortgage early can be exorbitant. Most people focus solely on rate but it’s important to look deeper than rate.
- Consider a mortgage helper. Buying a home with a rental suite can be a great option for homebuyers, especially if the area you love is pricey or you don’t want to buy a condo at a lower cost. It’s also a great option for existing homeowners looking to lower their mortgage payments.
- Don’t neglect your savings. In managing debt, you want to make sure you don’t need to use credit to get you through a financial emergency when your car breaks down or your fridge quits. Make a point of setting aside a small sum every paycheque into a special emergency fund. Having a budget can provide the discipline you need to save. It might not be the most thrilling task, but it’s one that will give you a clearer picture of where you stand and how much you can truly spend.
- Take the money on the table if you bought your first home in 2021. You may be able to take advantage of the $5,000 non-refundable Home Buyer Tax Credit amount, which provides up to $750 in federal tax relief when you file your tax return.
- Get a mortgage checkup. Get one every year, no matter where you are in your mortgage. Your car gets taken in for regular servicing; shouldn’t your financial future get the same kind of attention? This is also a great opportunity for me to find out what’s new with you!
In Brampton, Toronto and the GTA it’s a new year and a new chance to make sure your mortgage plan is helping you build wealth and thrive. Contact me for a discussion on your best mortgage strategy. I’m always here to help and answer any questions you may have.
