HERE ARE 3 GOLDEN RULES TO FOLLOW FOR YOUR MORTGAGE
HAVE YOU HAD YOUR MORTGAGE REALITY CHECK?
Every week I love to write as if I were the client researching for their first home or refinancing their current mortgage. So today, i share the 3 Golden Rules I share with all that enter my office at Mortgage Architects in Hamilton. I hope you consider these if you are considering purchasing or refinancing.
GOLDEN RULE #1
If you are acquiring a mortgage, you must have a purpose. This is especially true if there is a significant other. It is not surprising that Canada has a high divorce rate, and one of the leading causes is finances. Having a mortgage is expensive and can and will interfere with dreams and our wishes with life. Having a home is wonderful but not at the expense of your relationship. It is quite easy, no relationship, no home. Sit down and have a reality check conversation that not only could you afford a home, but you have considered building a family, starting a business, vacations, education or any personal interest that is invaluable to your life. Can you have both since owning a house is not the only thing important in your life?
GOLDEN RULE #2
I cannot shout this loud enough, please institute a pay yourself program. Most clients I interview have NO options if an emergency should occur. They unfortunately got in the bad habit of relying on debt and watching their cash flow wither to nothing until the next pay check arrives. When refinancing we insist, beg, encourage, lecture whatever you want to call it to pay yourself first. How do we do it? If pays go in your bank account automatically, we ask you to open a second bank account with the same financial institution. We set the system so that when you are paid, the bank will automatically debit that account and put your cash in the second account automatically. For example #100.00 will be taken from your pay account and placed in your second savings account. We want an automatic plan where we form a good habit and cash accrues in a safe place. When funds are required, you can access your secondary account and not rely on credit.
WORK THE MORTGAGE. Clients are always surprised when their broker puts the emphasis on mortgages third. But let’s re-cap, without a relationship going strong, your finances will suffer. With cash in the bank you have options.
So now that we have concluded that your life is humming along we want to focus on your mortgage. Most mortgage clients focus on rates, and why not that’s what banks sell you on. At Robert Floris’s Hamilton Mortgage Architects office here in Hamilton we enjoy low rates as well, but we really focus on amortization. Questions you normally will hear us ask are; when do you plan on being mortgage free? What are your financial goals? And how are we going to get there? If your goal is to be mortgage free then we suggest every year increasing the payment once per year by $50 to $100 per month per year. Why you may ask? The quicker you pay off the mortgage the less interest you pay over the time period. Conversely if you want to improve cash flow and enjoy life, then amortizing the mortgage over 30 years can accomplish the lifestyle you seek. The bottom line is that you should know what you want and have the mortgage, especially with today’s low rates, accommodate your goals.
Follow these 3 Golden Rules and life will be much better, some even say, “Paradise”.