History has proven that homeownership is a solid long-term investment, especially in Brampton, Toronto and the GTA. You build your equity stake through your regular mortgage payments and your home’s price appreciation over time. But you can do so much more to get ahead financially!
Here are more ways to build your wealth throughout your mortgage years.
Pay off your mortgage faster
Change from monthly payments to weekly or biweekly, which gives you an additional mortgage payment each year and takes years off your mortgage. Also consider putting found money like raises, bonus money, and tax refunds against your mortgage principal. Check your mortgage contract for the amount you can prepay each year.
Get a fresh start when needed
Too much high-interest debt (i.e., from credit cards, lines of credit, car loans, tax arrears, overdraft) over long periods of time is a definite wealth killer. It chokes your cash flow and having multiple debt payments can be stressful. If you have enough equity, you may be able to move that high-interest debt to your lower-rate mortgage, giving you one comfortable payment, improved cash flow, thousands in interest savings, and an important financial reset.
Renovate using your lowest cost funds
With historically low mortgage rates, homeowners with enough equity (i.e., 20 percent) are using the opportunity to roll the cost of their renovation into their mortgage for one easy monthly payment, and then using their prepayment privileges to pay it off faster. This is the best way to get the lowest rates for your renovation. Another way to use your equity for renovations is with a Home Equity Line of Credit that allows you to pay it off at any time with no penalty. The rate is higher than with a refinance, but you have more flexibility to pay if off. Or we can consider a second mortgage, which has a higher rate and is less flexible than a HELOC, but you don’t have to break your mortgage as may be required with a refinance. Whichever we determine is the best way for you to finance your renovation, it’s a winning strategy when you increase the comfort and enjoyment of your home, while also improving the long-term value.
Apply for incentives to help pay for energy saving upgrades to your home
Making energy-saving renovations to your home can give you a more comfortable and healthier living space and can lower your energy costs for years to come. There are two excellent programs that can help you fund your energy saving upgrades to your home.
- The federal government recently launched a new program that offers Canadians grants of up to $5,000 to pay for energy-saving home upgrades, such as insulation, furnaces, solar panels, windows, and doors, and up to $600 to help with the cost of home energy evaluations. For more information or to apply.
- If you paid mortgage default insurance when financing your home, you can also get a savings boost from your mortgage insurer. If you make retrofits to improve energy efficiency, you can apply for a refund of either 15 or 25% of the default insurance premium that you paid from your mortgage insurer. Applications are accepted within two years of the closing date of your mortgage and supporting documentation must be no more than five years old.
Look at your mortgage renewal as an important moment of opportunity
Given the large financial commitment of a mortgage, I always find it surprising that so many homeowners don’t pay much attention to their mortgage renewal and look at their options in the marketplace. When your lender sends out a letter offering you to renew your mortgage at their current offer, get in touch. Everything pertaining to your mortgage can be renegotiated, giving you the opportunity to get the best mortgage for your current situation, which may be very different from when you first got your mortgage. It’s tempting to do what is easiest, but please let me work on your behalf to make sure you get the best deal possible.
Be aware that your early payout penalty matters
When choosing between fixed-rate mortgages, be sure to compare how the early payout penalty will be calculated. If you ever need to get out of your mortgage early, having the right mortgage could save you thousands. It’s impossible to plan for many of the things that can happen in our lives, like job loss, illness, divorce, relocation, or another personal matter. If you take a lower rate mortgage with a high prepayment penalty, the benefit of that lower rate could mean nothing if you overpay on the penalty to get out of your mortgage. Advice on how to avoid painful penalties is part of the service I provide to my clients every single day.
Helping homeowners in Brampton, Toronto and the GTA save money and build their wealth throughout they mortgage years is my passion. Please get in touch at any time!
