The back school rush is finally over, summer is out and homework is in. Just like we get the shopping list for new school supplies, we should have a shopping list for our finances to make sure they are going to pass the grade. When was the last time you seriously thought about your mortgage? And I don’t mean thinking about winning the lottery and paying it off tomorrow, I mean thinking about the mortgage savings you could be using towards a new computer for the kids or parents only vacation. Take a look at our Home School shopping list below to see if your current mortgage is getting all A’s or a big fat F.
Backpack- Just like you check for a broken zipper before you buy a backpack, you need to know what is involved in breaking your mortgage term. Make sure you are informed on what your payout penalty is along with any other fees your current lender may charge. Most often it is either 3 months interest or IRD (interest rate differential.)
Pencils- Check the fine print in your original mortgage document. Some mortgage products have extra conditions if you want to pay out early. For example, if you took a zero down mortgage or a cash back mortgage product and you are breaking your term early, you will be have to pay back a pro- rated amount of those funds. This is in addition to the payout penalty and some no-frills discounted rate mortgages feature limited pre-payment privileges.
Calculator- How much could you be saving in interest with a few mortgage tweaks? Just by choosing accelerated bi-weekly payments, you can pay your mortgage off almost 4 years faster*. Think of all the things you could do with an extra 4 years of mortgage-free bliss!
Lunch- We all wish we could have more lunch money to get some better grub and your home equity could be your ticket to the gourmet! Best place to start is to determine the current value of your home and you can do this by asking a realtor friend to do a Comparative Market Analysis or look at your most recent property tax assessment. If your home is worth more than you owe, you have home equity available that could be used for other expenses such as education costs, taking a vacation or to pay off some of your high interest or high payment debts.
Notebook- Do your research! If you are thinking of getting a new mortgage or refinancing the one you already have, educate yourself on the options available to you. Rather than approaching just your current lender, ask for advice from an experienced mortgage broker who deals with many lenders which means they have access to a wider range of products.
Glue- When deciding who to work with, it is important to trust and feel confident with those people. Whether you decide to go back to your existing lender or to work with a mortgage broker, you should feel good about the information you have been given and the decisions you are making. Your mortgage professional is there to explain all details of your mortgage to you and answer any questions you may have.
Eraser- Is it time to move to a new lender? It makes sense to look around to see what else is available. Is it a better interest rate or a new product or term? Most lenders offer to pay your “moving” costs if you are simply switching your existing mortgage balance owing to them. This means, if your mortgage is up for renewal and you are not making any changes to the balance or amortization, the new lender will pay all legal costs and appraisal fees if required.
Just like you follow a list to do your shopping so you don’t overspend and buy doubles of what you already have, you should decide what you need before you go mortgage shopping. Talk to your friends, go on the internet or talk to a mortgage professional. Make sure you are comfortable with your mortgage as it’s with you longer than 4 pet hamsters and a goldfish!
* based on a $300,000 mortgage, 3.5% 5-year fixed rate, 30 year amortization, monthly payments 1342.91, accelerated bi-weekly payments $671.45.
