Today I’m going to talk a little bit about mortgage planning. In particular how identifying your long and short term goals can save you money on your mortgage in the long run.
What brought this up was that there were a bunch of articles lately about some unfortunate people that had been hit with really hefty mortgage penalties, in some cases $20,000-$30,000. Now I’m not saying this will happen to you, however I want to bring to everyone’s attention sort of what I think went wrong in these cases; where people should have looked to avoid the situation in the first place, and also what they should have done later on to lower their penalties (mitigate the amount of money they had to pay out).
The main thing that I like to do with my clients is I like to pry into their financial plans and personal lives a little bit and find out what are their goals, what are their short term plans, what are their long term plans, are they expecting any children in the future, do they have any kids that are going off to school that they need to pay for, would they be retiring, are they upsizing or downsizing their property. All these things actually change your mortgage financing and if you’re caught unaware for example if you’ve taken a long 5 year mortgage and you need to change something after 2 years you might be susceptible to a large penalty because you were not prepared for it. It is always good to identify what is going to change in your life and plan your mortgage term around that. There’s always a good reason to take a 1 year mortgage, 2 year mortgage and so on. One of those reasons will be to fit your scenario perfectly.
If you are caught in a situation where you didn’t plan or you do have some unexpected expenses come up and for some reason you need to sell your property, talk with your mortgage broker and your mortgage planner before you rush out and do anything because there are things that we (they) can do, or advise they can give to mitigate your risk, and get your penalties under control. If that’s the situation you are in or you’re just curious or starting to look for your first home and you want to make sure you get the right mortgage for you then give us a call and we’ll be happy to work through it with you.