Will Your Mortgage Retire With You?

 

 

 

This Scotia Bank Poll Found out that 1/3 of Canadians believe they will still have their mortgage once they retire.
That will be a huge portion of their retirement income spent on a mortgage.
Read poll below:

Snapshot: Canadian mindset on mortgages

Some Canadians with mortgages think they might carry them into retirement

TORONTO, Nov. 5, 2012 /CNW/ - According to a recent Scotia bank poll, the role of the Canadian home is key, with the majority of Canadians (77 per cent) indicating their home is an investment rather than an expense. The investment may extend beyond retirement for some; among those mortgage holders not yet retired, one-third (32 per cent) say they will likely still have their mortgage when they retire. That said, Canadians are eager to leave their mortgages behind, with almost three-quarters (72 per cent) of Canadian mortgage holders taking at least one step to becoming mortgage-free faster. When it comes to mortgage-mindset - Canadians are thinking in the right direction:

• Two-thirds (69 per cent) of Canadians report owning a home. For Canadian home owners, 40 per cent are living mortgage-free.
• The majority (81 per cent) of Canadians agree it is important to become mortgage-free as soon as possible.
• The most common step Canadians are taking to pay off their mortgage faster is to increase the frequency of their regular payments (29 per cent).
• One-third of Canadians (34 per cent) say they will be relying on their home equity to support them in retirement.

HOW TO PAY OFF MORTGAGE FASTER

--- The easiest way is to make accelerated biweekly payments-- there is only a few dollars difference but it will make a difference in years.
This Chart shows you how much you can save
Example: monthly vs. accelerated biweeklyJohn is trying to decide between paying his mortgage monthly and paying accelerated biweekly.
Details

• mortgage principal: $150,000
• amortization: 25 years
• interest rate: 5.45% for the entire mortgage amortization period.

Monthly and Accelerated Biweekly Payment Comparison

	Monthly	Accelerated biweekly
Number of payments per year	12	26 (52 weeks a year ÷ 2)
Payment	$911	$456
Total payments per year (principal and interest)	$10,932	$11,856
Principal paid over the amortization period	$150,000	$150,000
Interest paid over the amortization period	$123,368	$102,113
Interest saved	-	$21,255
Number of years to repay the mortgage	25.0	21.3
Years saved	-	3.7

With the accelerated biweekly payments, John will pay off his mortgage 3.7 years faster and save more than $21,000 in interest.

---Make Use of Your Prepayment Options: Monthly and or yearly
Mortgage prepayment options outline the flexibility you have to increase your monthly or lump sum yearly mortgage payments without penalty. The monthly prepayment provision is a percentage increase allowance on your original monthly mortgage payment, while the lump sum provision allows you to put money towards your mortgage principal. According to the Canadian Association of Accredited Mortgage Professionals (CAAMP), 28% of Canadians took advantage of prepayment privileges in 2010.
Many lenders have 15/15 or 20/20 prepayment allowances usually on the original amount of the mortgage and they will accept as little as $100.00 per each prepayment. So you do not have to save a lot to take advantage of the prepayment programs.

----Keep Tabs of Current Interest Rates
Sometimes even with a penalty it makes sense to break your mortgage and go with a lower rate.

By setting some more money aside for extra mortgage payments, it can shave years off of your mortgage, and will let you retire without a mortgage payment, a winning combination.

Time for a mortgage Checkup?
Call me and I will check your mortgage and let you know what you can do to shorten your mortgage thereby saving you money and years off your mortgage.
This is a free service.

 

 

 

 

 

 

 

Angela Kroemer, AMP

Mortgage Professional

TMG The Mortgage Group Canada Inc.

TMG Sharie Marie Mortgage Team

Local: 1.250.650.4182

TFP: 1.888.679.0190

Fax: 1.888.679.0192

akroemer@mortgagegroup.com

www.KROEMERmortgages.com

 

More Canadians Locking in Low-Rate Mortgages, Reducing Debt

Garry Marr  May 30, 2012 – 1:01 PM ET |Last Updated: May 30, 2012 5:57 PM ET

Highlights of CAAMP report:
- 23% of mortgage borrowers voluntarily increased their regular payments
- 19% made lump sum payments
- 10% made both lump sum payments and increased their regular payments
- 50% of borrowers pay at least $100 per month above their required payments
- 74% of borrowers who renewed in the last year saw their rate decrease by an average of one-half percentage point
- 83% of Canadians have at least 25% equity in their home
Canadians have been taking advantage of record-low interest rates to lock in their mortgages, a new survey suggests.
The Canadian Association of Accredited Mortgage Professionals, in its annual spring release, says among the 3.8 million Canadians with a fixed rate mortgage, 14% chose to lock in during the past year.
“This data supports comments by lenders that they have high numbers of new borrowers who start with variable rate mortgages but soon opt for the security of fixed rates,” says CAAMP in the report. Overall, 29% of those with mortgages have a variable rate leaving them with exposure to any changes in the Bank of Canada’s lending rate which the prime rate — used in those loans — tends to track.
The survey also found Canadians are making significant efforts to reduce their debt with 23% of respondents saying they voluntarily increased their regular payments, 19% making lump sum payments and 10% doing both.
For those who increased their regular payments, the average amount of the increase was $400-$450 per month. With about 5.85 million mortgage holders in Canada and roughly 1.35 million increasing their payments, it translates into about $7-billion per year. Lump sum payments averaged $12,500, and with about 1.1 million people making these payments, that equals about $13.75-billion.
“Despite daily warnings in the media about mortgage indebtedness — or maybe because of them — Canadians are making responsible decisions about their mortgages and they’re exhibiting confidence in their own situations,” said Jim Murphy, chief executive of CAAMP. “We should feel encouraged by this behaviour — it means Canadians are well positioned to weather a potential rise in interest rates.”
Overall Canadians have $994-billion in mortgages on their primary residences and $161-billion in controversial home equity lines of credit or HELOCs which allow them access to the equity in their home.
The total equity takeout from residences was $46-billion in the past year with renovations accounting for $17.25-billion of the money used. Another $10-billion was used for investments and $9.25-billion for debt consolidation.
Amortization periods, which have been legally shortened by Ottawa for insured government backed loans, are shortening. Lengths are down 20% but Ottawa legally reduced the length a mortgage could be amortized from 40 to 30 years over the past three years.

Craig Alexander, chief economist with Toronto-Dominion Bank, said the locking of mortgage rates has protected consumers from future rise in rates. “It’s a very positive thing that people are shifting to fixed rate because it provides greater security in protecting from upside risk in interest rates,” he said.
The survey also found despite the fact three of the major banks are either out of or backing out of the mortgage broker channel, it still is an important segment of the market. Brokers account for 26% of the market overall and captured 31% of activity in 2011.
The report is based on information gathered by Maritz Research Canada in a survey of 2,000 Canadian consumers in April and May 2012.
Posted in:Mortgages

http://business.financialpost.com/2012/05/30/canadians-locking-in-low-rate-mortgages-reducing-debt/

Angela Kroemer, AMP
Mortgage Professional
TMG The Mortgage Group Canada Inc.
TMG Sharie Marie Mortgage Team
1.250.650.4182
akroemer@mortgagegroup.com
www.KroemerMortgages.com
Your Mobile Mortgage Professional in The Comox Valley