Darryl Kraemer
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Do you need a Personalized Paydown Plan for your holiday bills?
January 27, 2025
Most Canadians suffer with their highest personal debt load in January, when the “holiday hit” arrives and your credit card statements let you know just how much the festive season cost you. It’s especially hard if you already had outstanding debt before the holidays. That’s why now is the perfect time to talk about your Personalized Paydown Plan.
If you have at least 20% equity in your home, I can show you how to use it to roll your high-interest debt into a new mortgage for overall savings. Here’s an example—in this case, mortgage, car loan, and credit cards total $355,000. We roll that debt into a new $358,000 mortgage, including a fee to break the existing mortgage, and take a look at the result:
|
| MONTHLY PAYMENTS | |
|
| Current | New |
Mortgage | $300,000 | $1,388 | $1,877 |
Car loan | $25,000 | $495 | $0 |
Credit Cards | $30,000 | $600 | $0 |
Total |
| $2,483 | $1,887 |
Current mortgage 2.79%, 5-yr term, 25-yr amortization; new mortgage 4.89%, 5-yr term, 30-yr amortization; car loan 7%, 5-yr amortization; credit card payment based on 2% of balance. For illustration purposes only. OAC. Subject to change.
That’s a savings of $596 each month. Now let's decide how you can use that $596. If you use your prepayment privileges and apply it to your mortgage, you could reduce your amortization from 30 years to 18 years. Or, invest it in an RRSP, RESP, or TFSA to reap tax benefits and grow your wealth.
You could also consider putting a portion into a dedicated “December fund” so the next holiday season doesn’t bring financial stress. Instead, you can enjoy guilt-free giving, knowing the bills are covered.
While refinancing is not an option for everyone and every situation, I have access to other financing options that can help. If you think you could benefit from this kind of financial restructuring, get in touch and we can review your situation carefully to determine the best path for you.
Two Tax-time Advantages for First-time Buyers
The 90-day boost – If you’re buying your first home now and your closing date is at least 90 days away, let’s talk. The Federal Home Buyers’ Program (HBP) and a tax refund can boost the funds you have available for your purchase. First, make as big an RRSP contribution as you can – up to your contribution limit or $60,000 per person. You can even use your downpayment savings for this. Big RRSP contribution means a great 2024 refund. Then, after 90 days, you can go back into your RRSP and redeem your contribution under the HBP program. So you’ve got your original downpayment funds back PLUS a nice tax refund. You’ll need to pay the withdrawn funds back on a repayment plan, but this strategy can make a substantial difference in the affordability of home ownership!
$1,500 for first-time buyers – Don’t leave money on the table if you bought your first home last year! You may be able to take advantage of the Home Buyers Tax Credit (HBTC) when you file your tax return. The $10,000 non-refundable HBTC provides up to $1,500 in federal tax relief. You qualify if neither you nor your spouse (or common-law partner) have owned and lived in another home for the past five years. For more information, visit the Government of Canada website.
Bank of Canada Cuts Policy Rate to 3.25 Per Cent
January 07, 2025
In the midst of the busy holiday season, there is some welcome news that could bring a little extra cheer at a time when many are looking to make the most of their budgets.
Bank of Canada Announces Interest Rate Reduction
On the final rate announcement for 2024, the Bank of Canada once again reduced interest rates by .5%, in an effort to stimulate economic growth and maintain its inflation targets. This move aims to provide some relief to households, encourage spending, and support businesses across the country. While the rate cut has widespread implications for the economy, it also directly impacts various financial products, most notably mortgages.
What This Means For Your Mortgage
If you have a variable-rate mortgage, you're likely to see immediate benefits. The interest rate on your mortgage may decrease, which could lower your monthly payments. This is certainly a welcome gift for homeowners, as the lower payments may provide some breathing room in your budget, especially with the higher costs of living many have experienced in recent months. For those of you looking for some financial flexibility during the holidays, this change could be a timely and appreciated break.
If you have a fixed-rate mortgage, the situation is slightly different. Since your interest rate remains locked in for the term of your mortgage, this rate cut won't directly affect your current payments. However, there's a silver lining: When your mortgage term comes up for renewal, you may be able to take advantage of the lower interest rates available at that time. This could provide an opportunity to secure a more favourable rate, reducing your future monthly payments or allowing you to pay off your mortgage faster.
Opportunities To Consider
With this interest rate reduction, now could be the perfect time to assess your mortgage situation and explore ways to make the most of these changing conditions. Whether you're considering refinancing your mortgage to take advantage of lower rates or simply reviewing your current terms to ensure they're still the best fit for your financial goals, this is a moment to evaluate your options.
Refinancing could help you lock in a lower rate and result in long-term savings. Additionally, refinancing offers the possibility of adjusting your mortgage to better suit your current circumstances, whether you're looking to consolidate debt or shorten your mortgage term. Given the rate cut, you might also consider the benefits of consolidating other high-interest debts into your mortgage, taking advantage of more favourable terms.
Warm Holiday Wishes
As the year draws to a close and the holidays approach, I want to extend my heartfelt wishes to you and your loved ones. May this festive season bring joy, peace, and prosperity to your home. Whether you're celebrating with family, friends, or enjoying some quiet time to yourself, I hope you have the opportunity to relax, recharge, and reflect on the positive moments of the year.
I'm Here To Assist
For personalized advice, get in touch. Together, we can make the most of this opportunity and ensure you're set up for success in the coming year.
From my family to yours, wishing you a wonderful holiday season and a bright start to the New Year!
Six Financial Resolutions That Can Change Your Life
January 07, 2025
Feeling the post-holiday financial squeeze? You’re not alone. January credit card bills are arriving to remind us how much we spent on the festive season. That's why this is the perfect time to ensure you have the financial control to achieve your goals. Here are some strategies that can help:
- Kill high-interest debt. If you carry significant credit card balances or other high-interest debt and have enough home equity, you can consolidate that debt into one low-rate mortgage. You’ll improve your cash flow and simplify your life with one easy payment. Best of all, you can pay down your debt faster and save thousands in interest. No more running up credit cards, and you’re golden.
- Boost your credit rating. You can improve your rating quickly with a few smart moves. Always pay your bills on time. Never let your credit card balance go past the 50% mark, i.e. if you have a $5,000 card, it should never exceed $2,500. That goes for any lines of credit, too. And don’t apply for store cards when you’re asked at check-out. The better your credit rating, the better the rates you can negotiate on your next mortgage.
- Step up your payments. If you are paying your mortgage monthly, consider changing to accelerated bi-weekly or weekly payments, increasing your payment amount, and putting a lump sum, such as a tax refund, on your mortgage principal. You can save significant interest over the life of your mortgage. Even small amounts add up.
- Renovate, don’t relocate. Feeling like it’s time to trade up? Consider this: the proper renovation might be all it takes to turn your current house into the home of your dreams. It is almost always less expensive to renovate than to relocate! I have some fantastic renovation financing options to help you improve the quality of your life while increasing the value of your home.
- Choose low-interest debt. A recent Mortgage Professionals Canada survey showed that almost 10% of homeowners had enough home equity to use their mortgages for low-cost financing. The average equity takeout was $47,600 for renovations, debt consolidation, investments, second homes and rental properties, purchases, or education.
- Do not sleepwalk through your mortgage renewal. Please contact me when you receive a renewal notice. Your renewal is your golden moment to save thousands. I can help ensure you get the best possible deal!
If you’re feeling financially overwhelmed or have a new purchase, refinance, or renewal in your financial future, get in touch so I can help ensure you get where you want to go.
Six reasons to work with an expert on your mortgage renewal
November 25, 2024
Given the large financial commitment of a mortgage, it's surprising that so many homeowners go on auto-pilot when it's time renew. Of course, your lender wants your repeat business and their renewal letter (typically sent between three and six months before your mortgage matures) will make it very easy and convenient for you to oblige – just sign the letter and your mortgage renewal is done. In fact, some borrowers may not even realize they don't have to accept their lender's offer. They can and should explore other options available in the marketplace, especially now since the stress test is no longer a factor if you want to switch lenders at renewal. So when you get your lender's renewal letter, ask yourself one simple question: "Can I do better?" The answer in most cases is a resounding "YES".
Here's why getting a mortgage expert working for you as early as nine months prior to renewal is a great way to ensure you get the best deal:
- Recently announced changes have eliminated the stress test for borrowers who want to switch lenders at renewal, which means you have choice! Since I have access to over 50 lenders, and thousands of product options, I can shop around to make sure you are being offered the best deal possible.
- A good credit score is important when you're looking to switch lenders – and your current lender may also take your score into consideration at renewal. You have more control over your credit score than you think, and you may want to discuss credit improvement strategies. I can help.
- If you have enough equity in your home, you may be able to move high-interest debt to your lower-rate mortgage to improve cash flow and save on interest. Renewal is the perfect time to do this. I can run the numbers to see if this strategy makes sense for you.
- Taking on new debt or leaving your current employment prior to renewal can affect your ability to move your mortgage to another lender. We can discuss the potential impact of changes to your personal situation.
- If your mortgage is uninsured, I can help determine if you can switch to a lower-rate insurable mortgage that offers long-term savings.
- If you need to free up cash flow for specific needs or life situations, a 30-year amortization might be an option for you to consider (20% or more in equity required).
Remember, I work for you. With access to dozens of lenders and hundreds of mortgage options, my goal is to help you make informed decisions so you always get the best package of rate and features that best fits your needs.
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