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Happy New Year!
A few thoughts around resolutions to address your existing Mortgage;
Payment Frequency and Amount.
Take charge of something that is within your control, the effective amortisation of your mortgage. A change up from Monthly payments to accelerated bi-weekly (i.e. rather than $2,000 per month you pay $1,000.00 every 14 days) will cost you the equivalent of one extra monthly payment per year, but it will shave more than four years off the total life of the typical mortgage.
Small payment increases have a similar effect, currently paying an amount that ends in an odd number? xx38.00, xx57.00, or xx71.00? Round it up to the nearest hundred, or even the next past the nearest.
Every extra penny goes straight to the principle, paying the mortgage off faster, or at least building greater equity in your property in a shorter time.
Every dollar counts!
The added benefit of making a slight increase to your payment each year is that it also prepares you for the possibility of higher interest rates, and thus higher payments, come renewal time. An added bonus.
What of Interest Rates?
As you likely know, once again the Bank of Canada left Prime alone all year long. Softening their language further around eventual rate hikes and suggesting that there will be no movement during 2014 either.
Much as last year there is still a subtle undercurrent that could in fact lead to a rate cut (admittedly still a long-shot) prior to a rate hike.
What should you do?
If you are currently in a variable rate product – Enjoy it. There is little pressure to lock in to a fixed rate product. Neither Prime (Variable) nor fixed interest rates are likely to move significantly anytime soon. If you are contemplating this please consult with your Mortgage Broker to discuss all the ramifications of such a move. (i.e. the change in prepayment penalties)
If you are currently in a fixed rate product;
Coming due in 2 years or less? Rates appear likely to be remaining low. However, contact your Broker six months from the renewal date to start planning. Be prepared with a detailed review in advance!
Coming due in 3-5 years? Still a good looking picture at this point. Feel free to schedule a consultation at any point throughout your mortgage term.
Are you 5 years into a ten year fixed rate mortgage? You now have only a 3 month interest penalty to get out and likely save thousands of dollars, please consult with a Broker and work through the numbers and take appropriate action.
Fixed rate movement in 2014;
As longer term Fixed interest rates are predicated on the movements of the Bond Market we could well see more volatility throughout 2014 with movement both up and possibly back down again in a .50% – .75% bandwidth. Increases beyond this seem unlikely given the current outlook.
Personally I have no plans to deviate from my own personal variable rate mortgages.
What about the value of your home?
2014 appears, at this point, to hold much of the same as 2013. Limited volatility in small pockets of the lower mainland with the majority of properties in the median price-band seeing neither significant increases nor decreases.
Motivation to buy or sell in 2014 for most folks will be about putting down roots and making a long term investment, not about making a killing on a short term flip. (although those rare opportunities are out there too)
Values go where jobs go, and jobs keep coming to BC.
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Thank you for a remarkable 2013!
May your 2014 be Most Awesome!
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