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Your Mortgage ~ 25 Ways to Save Money

November 12, 2013

There are many ways you can save money when negotiating and paying a mortgage. Here is a list of 25 ways to save yourself enough money to put your kids through university or if invested wisely, can become a large portion of your retirement plan.

Last year in Canada the five largest banks posted profits of $22.4 billion, up from $19.5 billion in 2010. A large portion of that came from mortgages. When one considers that a mortgage averages $301,000, installment loans average $22,849, for auto loans it is $19,228 and credit cards are $3,573 on average, it is easy to see where people are paying the bulk of interest.

THE BANK CONSIDERS PROFITS MORE IMPORTANT THAN YOUR NEEDS.

1. Banks create money out of thin air. They are in the business of making a profit. Unless you share a bed or blood with the loans officer, then you need to be on your toes when negotiating a loan (mortgage).

2. If you are a long term customer of the bank, do not assume that you will get the best rate. Do your homework on the internet. A new customer that is more knowledgeable can negotiate an “introductory” rate that is better than you may get. Read #1.

3. Most terms in the mortgage contract are negotiable. Read the contract thoroughly.

4. Most banks will use the Posted Rate to determine a penalty clause rather than the lower rate you negotiated. This is called a “Change Up” and can cost thousands more if you are forced to sell and pay out the mortgage. Check #1.

5. Learn to ask for a discount!! I may repeat this again.

6. Many bank managers receive a daily or weekly list of discounts available. It changes, so if you have a good relationship with the manager, see if there is something available on  mortgage negotiation day that works for you and not the bank.

7. If you are a long term customer, the bank may give you a good mortgage rate to keep you in the hopes that they may cross sell you another product. Always check elsewhere before signing on the dotted line.

8. NEVER BUY MORTGAGE INSURANCE FROM THE BANK. The insurance company will take your money for years, but disqualify you when you need it because you were never properly qualified in the first place. It is about bank and insurance company profits and does not benefit the customer. Read #1.

9. Educate yourself. The banks spend a lot of money training their loans staff. Read my blog. Read other peoples blogs on banking.

10. Learn to negotiate. You will not get the best rates unless YOU ask.

11. Check on your bank’s variable rate. Traditionally it is at least 1 % lower than the fixed rate  which translates into over $4000 in 5 years on a $250,000 mortgage. Use the variable rate, but NEGOTIATE to be able to convert to fixed rate , without penalty, should the interest rates start to skyrocket.

12. Current rates are from 3.09% to 5.24%. The difference in interest on a 5 year term, 25 year amortization, with a $300,000 mortgage is $70,211 (5.24 %) – $42,883 (3.09%) = $27,328. That is a pretty decent car in my world. NEGOTIATE.

13. The banks are in the business of lending money. If your mortgage is coming up for renewal let them know you are shopping. You will get a better rate!! Banks do not make money if they don’t lend money. A lesser profit from an educated customer is offset by a greater profit from someone who believes the bank is their friend.

14. Ask the question!!! The answer to all unasked questions is “No”.

15. Check your credit score. Try to keep it above 620. You can get it for free once a year without hurting your score. FICO is the agency lenders use when they are evaluating your past ability to pay. If your credit score slips, repair it as soon as possible.

16. The longer you are at a financial institution, the greater the possibility of getting better rates as long as you do your homework.

17. Talk to a local mortgage broker. Give her your information and let her shop for you. She is working in YOUR best interests, not the banks’. If the bank is not in the ballpark, go with the broker. Somebody will get paid for the work of negotiating your mortgage, let it be her rather than the president getting a slightly larger bonus.

18. If you are buying for the first time or renewing your mortgage, go online for current rates (Canada Mortgage.com). Print the rates and go mortgage shopping with list in hand.

19. To get your mortgage paid the fastest with the least money, you must pay interest only on what you owe, decrease your mortgage payments along with your decreasing balance and apply the savings as interest free payments against your outstanding balance. This must be negotiated! The bank does not do this as a matter of course.

20. Use your savings account as a holding pen for investments or emergencies. It is better to put your money under your mattress than save for retirement because you have to pay taxes on the interest. Savings accounts are paying less than 2% while inflation is about 5%. Check Shadowstats .

21. Learn to ask for a discount!! Read #1.

22. Start a home based business. A portion of all home expenses can be written off even if you are not successful. The best option would be a network marketing company with a product that resonates with you and that you would use. If you are successful, that is better than working at a second job you hate.

23. Learn to negotiate!!!!! Check #1

24. If you want to make your mortgage payments tax deductible use the Smith Manoeuvre or a variation as an investment ~ tax strategy. It is not for everyone, but if you can utilize it, it can be a powerful strategy.

25. Use your home as an ATM for investment money. This is a better option than a mortgage burning party for your long term financial health. These have been heavily written about by Robert Kiyosaki in his series of books, his lectures and his on-line presence.

I cannot state it strongly enough. Banks are in it for profits. If you do not do your homework, you will pay more, usually much more. So take a look at my list, check my blog for more information and cultivate any friend or family member in the banking business. Uninformed people pay more!! Check #1.

 

IF you do not like paying the bank, contact me for a cost free consultation at fredoruk@hotmail.com or 250.766.2106

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