The Bank of Canada says interest rates aren’t rising any time soon, and that’s made the housing market incredibly busy, especially in the Lower Mainland.
“It’s good news for home owners, even if they’re not planning to buy or sell. There are definitely opportunities to save,” says Manjit Lally, Envision Financial Branch Manager.
1. Refinance your mortgage
Take advantage of historically low interest rates and swap your mortgage for something cheaper! Even with penalties, you may find serious savings.
“As soon as you have an inkling that you might buy, sell or renovate, start a conversation with your advisor. Find out what your penalties would be. They vary depending on your mortgage type, and consumers often just aren’t aware of those details,” Lally says.
- Fixed rate: Penalties are high, because your contract typically allows the bank to charge you the interest they’re missing out on. It’s called an interest rate differential (IRD) — the bank compares the amount of interest they’d earn at your original rate and at the current rate, and charges you the difference.
- Variable rate: Often there’s a penalty of three months’ interest, which is a little easier to swallow.
- Blend and extend: Blend your existing interest rate with today’s lower rate for something in the middle. “There are some applicable fees, but they’re quite low compared to mortgage penalties. You can also add extra funds if you have equity available,” Lally says.
- Start fresh with a new mortgage block: Don’t touch your existing mortgage, but use available equity in your home to get a new mortgage block at today’s great rates.
2. Avoid fees with a Home Equity Line of Credit (HELOC)
When the market is hot your home’s value increases, and you can use that extra equity for a secured line of credit.
“Keep your existing mortgage as-is, and use your available equity for a HELOC. It’s well-priced, and much cheaper than the interest on a credit card or an unsecured line of credit,” Lally says. “We typically advise home owners use the HELOC as an emergency fund, in addition to their savings. It’s much more flexible than a mortgage — you can pay it down to zero, then use it back up if the unexpected happens.”
3. Consolidate in a credit union
If your mortgage is with a broker, your investments are with an advisor and your day-to-day spending is at a bank, it’s impossible to get good advice on how to save. At Envision Financial, your entire financial picture is in one place, and that means better service and better savings.
“We offer all four quadrants of service to our members: banking, borrowing, insurance and investment. The more we know about you, the more prepared you’ll be for all your life’s goals. Are you retiring soon? Do your parents need more care? Children going to school? Your mortgage isn’t a stand-alone conversation, there are lots of other things to consider when making that decision.”
Envision Financial offers service in many languages, including Punjabi, and offers customized advice at 19 branches across the Lower Mainland. Find more mortgage tips at envisionfinancial.ca, or book an appointment at a branch near you.
Envision Financial is a division of First West Credit Union.