SHOULD YOU PAY DOWN THE MORTGAGE OR INVEST?

SHOULD YOU PAY DOWN THE MORTGAGE OR INVEST?

Source: www.baystreet.ca

One of the biggest debates in the personal finance community is whether someone should use their extra cash to pay down the mortgage or put that money to work in investments.

The mortgage paydown strategy is popular with risk-adverse folks. Investing is risky, while shoveling extra cash towards the mortgage offers a guaranteed return that’s usually better than GICs or high-interest savings accounts.

Paying off the mortgage early is also incredibly empowering, at least for some people. They yearn for debt freedom more than anything.

This will enable them to do things they’ve always dreamed of, like travel, take a lower paying job, or retire early.

The investing argument essentially comes down to one factor. Investments in the stock market grow much faster than mortgage interest. If stocks return 8% over time and a homeowner can reasonably expect to pay 3% annually over a 25-year mortgage, the investor would end up with more money.

It works out to taking a 3% loan to make 8%. The only problem is the 8% return won’t be consistent. It will vary from year to year.

Perhaps the best solution is a hybrid approach. Paying down the mortgage early is a worthy goal that can save thousands in interest over the life of the loan. But investing for the future is incredibly important too. A 50/50 split between the two goals is a worthy compromise.

Remember, neither of these choices are terrible. Both will ensure you become richer in the long run, which is the ultimate goal.

Posted by Steven Porter. Steven is a licensed Mortgage Agent with Mortgage Architects, Certified Reverse Mortgage Specialist (CRMS); Seniors Real Estate Specialist (SRES) and Accredited Buyer Representative (ABR) and retired, real estate broker with 30 years experience in residential real estate. Steven can be reached at 1-905-875-2582; steven.porter@mtgarc.ca or online at 1800Mortgages.ca

Title Insurance

Lender title insurance is a one-time premium required to insure your mortgage and cover any risks to title. It is typically covered for the amount of your mortgage and will be available until your mortgage is fully discharged. Should any challenges arise in relation to title, your mortgage will be fully insured and covered for protection, giving you and your lender added security and peace of mind.

Mortgage Architects	Steven Porter       CRMS ABR SRES Broker Lic. No. M15001919 Mortgage Agent P 905-878-7213 C 905.875.2582 Brokerage #12728 14 Martin Street, Milton, ON, L9T 2P9
	5675 Whittle Road, Mississauga, ON, L4Z 3P8 Privacy Policy

What is my Credit Score?

With a range from 300 to 900, your credit score captures your perceived lending risk at a moment in time. Your score tells lenders what kind of risk you are likely to be as a borrower. Your score can change from month to month. The companies that hold your credit and loan accounts report monthly transactions to credit bureaus. This is beneficial to you because it means you can improve your score with the right credit “behaviours”. Benefits of a Credit Score Above 750 • Lenders offer a quick approval at the best possible rates • This score says the person is reliable and responsible with debt Challenges of a Credit Score Below 620 • You could pay a premium on your borrowing rate • You may find it difficult to qualify for a mortgage

1. Previous payment history (approx. 35% of score) Your track record of paying your credit accounts on time is the most heavily weighted attribute. Events such as late payments, collections, judgments, liens, foreclosures, bankruptcies, and wage attachments are part of this category and are considered quite serious. More recent events and large amounts will affect your score more than older events and small amounts. 2. Current level of indebtedness (approx. 30% of score) This portion of the score considers whether you are overextended or not. Too many credit cards or keeping your accounts at or near their maximum limit can signal that you don’t manage credit responsibly, and that you may have trouble making payments in the future. 3. Length of credit history (approx. 15% of score) The longer you have had credit in good standing the lower the risk indicators. This score considers the age of your oldest account and an average age of all of your accounts. New accounts will therefore lower your average account age. 4. Pursuit of new credit (approx. 10% of score) Opening several credit accounts in a short period of time is a risk indicator. The number of enquiries done on your behalf can also have an effect. However credit scores try to differentiate between rate shopping for a single loan and searching for many new credit accounts. This can help avoid collections, which has a negative impact on your credit score for a long period of time. 5. Types of credit available (approx. 10% of score) This attribute considers the mix of credit accounts you have: credit cards, retail accounts, installment loans, accounts with finance companies, and your mortgage. The goal is to determine if you have a healthy mix of credit. For instance, having a car loan, mortgage and credit card is more positive than a concentration of debt in only credit cards.

Mortgage Architects	Steven Porter        CRMS ABR SRES Broker Lic. No. M15001919 Mortgage Agent P 905-878-7213 C 905.875.2582 Brokerage #12728 14 Martin Street, Milton, ON, L9T 2P9
	5675 Whittle Road, Mississauga, ON, L4Z 3P8 Privacy Policy

6 Questions to ask yourself before selling your home

From wanting a bigger space or moving closer to work, there are myriad of reasons people decide to place their home on the market. No matter the reason, selling your home is not something you can do on a whim. Rather, you need to consider a number of variables and options before you place a “for sale” sign on your home. If you are seriously considering selling your home, here are a few important questions to ask yourself before taking that leap. What can I expect to fetch for my home? It is vital that you establish a ballpark figure on how much you want to sell your home on the market. Knowing the price range you can expect to receive in the proceeds of the sale of your home help you establish how much you can afford for your next home, and ultimately if it is even worth selling your home. What costs will I incur in the process of selling my home? The process of placing your home on the market entails much more than placing a for sale sign on your front lawn, there are costs involved. These costs will also impact your ballpark figure. For instance, do you plan to obtain the services of a real estate agent? Do you have repairs needing to be completed? Do you plan to hire a professional to stage your home? These are a few of the possible costs you will likely need to consider in the process of placing your home on the market. Post-sale, there are additional costs that also impact your final net amount. These closing costs may include legal costs, adjustment costs, and mortgage discharge fees. Finally there are costs associated with selling and moving into a new home such as mortgage insurance, land transfer tax and a variety of moving costs. These costs combined will impact your net ballpark amount and ultimately your affordability. Do I need a pre-approval for my mortgage? In order to know your overall affordability, it is imperative you get pre-approved for a mortgage. Even though you are a homeowner, there may have been changes to mortgage rules and even your own personal financial situation since you first became a homeowner. Knowing your market sale price, possible costs and pre-approved amount will provide you with a clear financial picture of how much you comfortably afford for your next purchase. Contact a MA broker to see how much you can be pre-approved for. When should I sell my home? If you have flexibility with respect to time (i.e. you don’t have to sell your home quickly due to an out-of-country move), place your home on sale during prime season. For the housing market, primetime is spring. This is the time when a greater proportion of prospective buyers are actively looking and hence, you will receive the most traffic and likely sell in a shorter time frame. Additionally, with more buyers on the market, it is possible you may receive multiple offers and may be sell your home for a very competitive price. How do I prepare my home for sale? When placing your home on the market, the key selling factor is curb appeal. You need to ensure your home is as visually appealing as possible. As result, you will have to invest time, equity sweat and perhaps money in sprucing up both the interior and exterior of your home. Should I just renovate instead? It is clear, selling your home and moving does not come cheap – there are many associated costs that make the process expensive. Are you thinking about moving because you would like more space or perhaps a more up-to-date home? If so, have you considered renovating instead of moving? Many homeowners are apprehensive about renovating but in the long run it may be cheaper to renovate than relocate. Also renovating your home can most definitely add more value to your home in the form of equity. So before you decide to move, take some time evaluate the renovation option as it may be a better choice for you. Selling your home involves a considerable amount of financial, time and emotional investment. With the time you do have, evaluate and take stock of if you should place your home on the market and if so, know how much you will have to invest and how much you can expect in return. Additionally, have a strategy in place – the act of selling and moving into a new home is heavily process driven and requires one to be organized, efficient and able to effectively deal with stress. Lastly, don’t be afraid to consult with professionals. Our MA brokers have a wealth of knowledge and expertise and are happy to provide you with the advice to help you make your decision – contact one today! WANT TO KNOW MORE? CALL ME TODAY! Mortgage Architects Steven Porter       CRMS ABR SRES Broker Lic. No. M15001919 Mortgage Agent P 905-878-7213 C 905.875.2582 Brokerage #12728 14 Martin Street, Milton, ON, L9T 2P9 5675 Whittle Road, Mississauga, ON, L4Z 3P8 Privacy Policy