Date: May 10, 2024
Category: Blogs,Mortgage Tips & Advice
DON’T READ THE HEADLINES 😨🔍🏡
🏦 Bank of Canada warns of steep jump in mortgage payments – Globe and Mail
💸 Pain of Canadians’ mortgage payment shock is not over – Financial Post
📈 Bank of Canada warns mortgage payments due for renewal will skyrocket over 60% by 2026 – True North
🏚️ Canadians brace for the mortgage renewal cliff – Financial Post
🔄 Riding Out the Mortgage Tides is a ‘Mission Possible’ for Canadian Households – TD
These are just a few of the headlines scaring current Canadian homeowners who are looking at an upcoming renewal. 😨
Instead of scaring consumers, how about we try to educate consumers? 📚 Let’s look at some math. 🧮
Assume that you took on $500,000 in 2020 with a rate of 2.49% for five years, fixed with a 25-year amortization… and let’s assume you actually read my newsletters and did as I suggested: switched to accelerated bi-weekly payments and increased your payments by $50, for example.
Here is your math for those five years:
💰 $500,000 starting mortgage amount
🧾 $1,118.67 is your base payments + $50 additional pre-payment = $1,168.67 bi-weekly accelerated.
Over the five years, you paid:
💵 $56,133.83 in interest payments
💲 $95,793.27 in principal payments
🏦 $404,206.73 is your balance on renewal
Your renewal amortization is sixteen years instead of 20 years. Yes, you shaved off an additional four years due to the low-interest rate on this term and the extra $50 payments. 🎉
Now you are up for renewal, and we will assume your new rate will be 4.99%, which is just a hair over double the rate you had for the last five years.
Here is your math for the next five years – with no additional payments this time- however, I would still suggest that.
💰 $404,206.76 starting mortgage amount
🧾 $1,524.80 is your acc-biweekly payments
That is an increase of $356.13, which is only a 30% increase from what you are paying now. 📈
Moral of the story and your options!
This is not a 65% increase in payments, but it is significant enough that it may impact some clients. So, what are your options?
🔹 Stick it out and re-budget life.🔹 Increase your amortization back to as high as 30 years. I do not love this idea since you have worked so hard to get the amortization down, but like everything in life, we have to do what we need to do to get to the next step. And if that means increasing your amortization, there is nothing wrong with that. We can always course correct on the next term. Life happens, and we have to be able to roll with it.
Want to talk about your mortgage options and plan for your upcoming renewal? Let’s talk. 📞
Click here to book a time to connect and review your questions.
Talk soon,
Ana
Mortgages can be complicated; we are here to help you make “cents” of it.
We focus on Mortgage Solutions, Period!
To learn more connect with Ana Cruz 905.870.0513 or email at ana@askanacruz.ca
