Planning for the future and potential job loss is one of the most important undertakings you can make to ensure you can pay your mortgage in an uncertain economy.

Dominion Lending Centres Mortgage Professionals often suggest you put money aside each pay period so you can place six to 12 months’ worth of mortgage payments into a short-term GIC as security for a possible job loss.

And, best of all, if your job remains secure, you can take the money out of your GIC and make a pre-payment back on your mortgage on your anniversary date, which can end up saving you thousands of dollars in interest payments.

Refinancing to access your home’s equity

But if it’s not plausible to save money each pay period, refinancing to access the equity you’ve already built up in your home is another valid option for planning ahead in uncertain times.

In addition to freeing up money to store future mortgage payments in a GIC, some of the money can also be used to pay off high-interest debt – such as credit cards – and get you and your family off to a fresh financial start.

You will find that taking equity out of your home to pay off high-interest debt can put more money in your bank account each month.

And since interest rates are at historic lows, switching to a lower rate may save you a lot of money – possibly thousands of dollars per year.

There are penalties for paying your mortgage loan out prior to renewal, but these could be offset by the extra money you acquire through a refinance.

With access to more money, you will be better able to manage your debt. Refinancing your first mortgage and taking some existing equity out could also enable you to make other investments, go on vacation, do some renovations or even invest in your children’s education.

Keep in mind, however, that by refinancing you may extend the time it will take to pay off your mortgage.

Options for paying your mortgage down quicker

There are many ways to pay down your mortgage sooner that could save you thousands of dollars in interest payments throughout the term of your mortgage.

Most mortgage products, for instance, include prepayment privileges that enable you to pay up to 20% of the principal (the true value of your mortgage minus the interest payments) per calendar year. This will also help reduce your amortization period (the length of your mortgage), which, in turn, saves you money.

Another way to lower the time it takes to pay off your mortgage involves changing the way you make your payments by opting for accelerated bi-weekly mortgage payments. Not to be confused with semi-monthly mortgage payments (24 payments per year), accelerated bi-weekly mortgage payments (26 payments per year) will not only pay your mortgage off quicker, but it’s guaranteed to save you a significant amount of money over the term of your mortgage.

If, for instance, you have a $100,000 mortgage, an interest rate of 5% and an amortization period of 25 years, your monthly mortgage payment would be $581.60 and your total payments for a year would be $6,979.20 ($581.60 x 12).

To understand the savings accelerated bi-weekly mortgage payments can make, take the monthly mortgage payment of $581.60 and divide it by two ($581.60 ÷ 2 = $290.80).  Next, take that payment and multiple it by 26 to arrive at your total payments for the year ($290.80 x 26 = $7,560.80).

As you can see, by using the monthly mortgage payment plan, you’ve made payments totalling $6,979.20 for the year, while using the accelerated bi-weekly mortgage plan you’ve made payments totalling $7,560.80 – a difference of $581.60.

Basically, with accelerated bi-weekly mortgage payments, you’re making one additional monthly payment per year.

Using this example, you would reduce the amortization on your $100,000 mortgage from 25 years to just over 21 years and your total savings on interest over the life of the mortgage would be just over $12,000.

By refinancing now and paying off your debt or putting money aside for future mortgage payments, you can put yourself and your family in a better financial position.

About the Purcell Mortgage Team:
The Purcell Mortgage Team are an industry-leading pair of mortgage professionals who have been serving Calgary for several years. JoAnne Purcell was ranked within the Top 50 Canadian Mortgage Professionals in the CMP Magazine. If you are in need a reputable calgary mortgage specialist, please contact us today!

The Purcell Mortgage Team are experts on Calgary mortgages!

Before Christmas arrives many people take a few days to review their financial position and determine what kind of financial shape they’re in.  If you’re like us, or anyone else for that matter, how much you spend during th Christmas season is completely dependent on the figures in your bank account.  Some have the luxury of a limitless budget, but for the rest of us a little bit of careful planning can go a long way.

Budgeting Around Your Mortgage

Many people budget around their “rent”, or the cost of their mortgage payment and nothing else.  What people fail to realize is that there are many more expenses tied into your home than just your mortgage payment.  Mortgage-related expenses, such as property taxes, can creep up on you when you least expect it.  If you are a new homeowner, these expenses could lead to a very lean Christmas.

Let’s not forget the added expenses associated with the wonderful winter season, either.  Notable seasonal expenses include:

• Increased heating costs - Many people can go the majority of the spring and summer without the heat turned on.  Come late September, suddenly the furnace is back on and with it comes a nice heating bill.

• Increased gas expenses - While subtle, your vehicle(s) do use more gas in the winter than they do in the summer.  These are many reasons for this, but it comes down to the amount of effort needed from your vehicle in order to get it to move the a distance.  In the summer, where traction is easy to find, it doesn’t take much at all.  However, all the slipping and sliding in the winter makes life particularly difficult for your car.  For some, their gas costs nearly double.

• Seasonal maintenance -  Drafty windows are a sure-fire way to increase your heating costs and lower your homes temperature in one foul swoop.  Just like the seals around windows need to be replaced every now and again, there are numerous seasonal items that require maintenance every winter.

This Christmas season, don’t get caught with your pants down.  Take the time to properly budget your Christmas season, as well as the time that follows it, so that there aren’t any nasty financial surprises waiting for you come spring.

About the Purcell Mortgage Team:
Todd Purcell and JoAnne Purcell are the certified mortgage specialists in Calgary that make up the Purcell Mortgage Team.  Todd and JoAnne strive to maintain an exceptional level of service to all of their current and prospective clients.  Do you live in Alberta and are in need of reputable and ethical mortgage assistance?  Contact the Purcell Mortgage Team today!