Your mortgage amortization period is the number of years it will take you to pay off your mortgage. Depending on your choice of amortization period, it will affect how quickly you become mortgage-free as well as how much interest you pay over the lifetime of your mortgage (longer lifetime equals more interest, whereas a shorter lifetime equals less interest but also bigger payments).
Let’s start by looking at the mortgage industry benchmark amortization period. This is typically a 25-year period and is the standard that is used by the majority of lenders when it comes to discussing mortgage products. It is also typically the basis for standard mortgage calculators.
While this is the standard, it is not the only option when it comes to your mortgage amortization. Mortgage amortizations can be as short as 5 years and as long as 50-years(interest-only)!
Opting for a shorter amortization period will result in paying less interest overall during the life of your mortgage. Choosing this amortization schedule means you will also become mortgage-free faster and have access to your home equity sooner! However, if you choose to pay off your mortgage over a shorter time frame, you will have higher payments per month. If your income is irregular, you are at the maximum end of your monthly budget or this is your first home, you may not benefit from a shorter amortization and having more cash flow tied up in your monthly mortgage payments.
When it comes to choosing a longer amortization period, there are still advantages. The first is that you have smaller monthly mortgage payments, which can make home ownership less daunting for first-time buyers as well as free up additional monthly cash flow for other bills or endeavors. A longer amortization also has its advantages when it comes to buying a home as choosing a longer amortization period can often get you into your dream home sooner, due to utilizing standard mortgage payments versus accelerated. In some cases, with your payments happening over a larger period, you may also qualify for a slightly higher value mortgage than a shorter amortization depending on your situation.
I am happy to help with the decision for the amortization that best suits your unique requirements and ensures you have adequate cash flow. However, it is important to mention that you are not stuck with the amortization schedule you choose at the time you get your mortgage. You can shorten or lengthen your amortization, as well as consider making extra payments on your mortgage (if you set up pre-payment options), at a later date.
Ideally, you are re-evaluating your mortgage at renewal time (every 3, 5, or 10 years depending on your mortgage product). During renewal is a great time to review your amortization and payment schedules or make changes if they are no longer working for you.
If you have any questions or are looking to get started on purchasing a home, don’t hesitate to reach out to me today!
Fall in love with your home and your workspace again with these tips to help you make your home office space more productive!
Dealing with money is part of self-care. Financial stress can have an impact on everyday life, change the way we approach our relationship with money and have a lasting effect on our overall well-being!
Financial self-care involves taking intentional and proactive steps to manage your finances, reduce stress related to money, and foster a healthy financial well-being. Here are some key aspects of financial self-care:
Remember, financial self-care is an ongoing process that requires attention and commitment. By actively managing your finances, you can build a more secure and fulfilling financial future. If you are feeling stressed due to debt management or higher-interest debts, give us a call and we can walk you through some solutions!
January 16, 2024
The new numbers just came out today for December. Canada’s annual inflation rate rose in December to 3.4% from 3.1% in November. This is down from a 40-year high of 6.8% in 2022. Rising rates have been able to reduce the inflation rate but now the higher mortgage costs are one of the biggest causes for inflation to climb again. Canada’s Central bank is trying to target 2%.
Mortgage interest costs were the largest contributor to higher inflation, going up 28.6% compared with the previous December 2022 as interest rate hikes saw borrowing costs balloon. Increases in the cost of rent, air transport, fuel, and passenger vehicles contributed to the higher December figures.
Canadians are paying 7.7% more for rent in December 2023 than in December 2022. Groceries have risen 5.9% in the past 12 months. A typical family would pay $1065 more for food per person in 2023. The forecast shows 2024 will see changes of 2.5-4.5% for groceries.
Inflation refers to the percentage increase in the general price level of goods and services in an economy over time. When the inflation rate is positive, it means that, on average, prices are rising. For Canadians, the impact of inflation can be both positive and negative, depending on various factors. Here are some key points to consider:
Purchasing Power: Inflation erodes the purchasing power of money. If prices are rising, each dollar buys fewer goods and services. This can affect the standard of living for Canadians, especially if their incomes do not keep pace with inflation.
Cost of Living: A moderate and predictable level of inflation is generally considered normal in a growing economy. However, if inflation is high and unexpected, it can lead to an increase in the cost of living. Essential goods and services, such as food, housing, and transportation, may become more expensive.
Interest Rates: Central banks, such as the Bank of Canada, may use monetary policy tools, including interest rates, to control inflation. If inflation is too high, central banks might raise interest rates to cool down economic activity. Higher interest rates can affect borrowing costs for Canadians, including those with mortgages or other loans.
Savings and Investments: Inflation can impact the real return on savings and investments. If the rate of inflation is higher than the return on investments, the purchasing power of savings may decrease. Investors need to consider the impact of inflation when making investment decisions.
Wage Growth: In an environment with rising inflation, wages need to keep pace with the increase in the cost of living. If wages do not rise at a similar rate, households may experience a decline in real income.
Government Policies: Government policies, such as fiscal measures and social programs, may be influenced by the inflation rate. Governments often aim to strike a balance between supporting economic growth and keeping inflation in check.
Individuals, businesses, and policymakers must monitor inflation trends and adjust their strategies accordingly. If inflation is well-managed and remains within a target range, it can contribute to a healthy, growing economy. However, excessive or unpredictable inflation can pose challenges for individuals and the overall economic stability of a country.
An inflation rate of 3.9% can have several implications for the Bank of Canada and its monetary policy decisions. Here are some ways it may affect the central bank:
Interest Rates: One of the primary tools the Bank of Canada uses to control inflation is the benchmark interest rate. If inflation is significantly above the target range (which is typically around 2% in many developed economies, including Canada), the central bank might consider raising interest rates. Higher interest rates can help cool down economic activity, reduce spending, and bring inflation back to the target range.
Monetary Policy Adjustment: In response to higher inflation, the Bank of Canada may adjust its monetary policy stance. This could involve tightening monetary policy by raising interest rates or using other tools to reduce the money supply. The aim would be to curb inflationary pressures.
Inflation Targeting: The Bank of Canada has an inflation-targeting framework, aiming to keep inflation within a specific range. If inflation consistently exceeds this range, the bank may need to bring it back under control. On the other hand, if inflation is below the target, the bank might consider more accommodative policies to stimulate economic activity.
Exchange Rates: Inflation differentials between countries can influence exchange rates. If Canada's inflation rate is significantly higher than that of its trading partners, it may affect the value of the Canadian dollar. Central banks often consider exchange rate implications when making monetary policy decisions.
Economic Growth: Higher inflation can be indicative of robust economic activity, but it may also signal overheating. The Bank of Canada aims to balance economic growth with price stability. If inflation is driven by excessive demand, the central bank might take steps to prevent an unsustainable boom that could lead to a subsequent bust.
Communication with the Public: The Bank of Canada regularly communicates its monetary policy decisions and outlook to the public. In a situation with elevated inflation, the bank may provide clear guidance on its intentions and the rationale behind its policy actions. This transparency helps businesses and individuals make informed decisions.
It's important to note that central banks consider various economic indicators, not just inflation, when formulating monetary policy. The goal is to achieve a balance that supports sustainable economic growth while maintaining price stability. The specific actions taken by the Bank of Canada will depend on the overall economic conditions, including factors such as employment, GDP growth, and inflation expectations.
We are all hoping to see a hold to future increases, but we must wait and see!!! House sales saw a bump in December so if you want to buy, now is best as the spring may see more competition and price increases again. Call to book a review!
“New Year, new you” may be a cliché but it is for a reason! The New Year always has us thinking about where we are now, and where we want to end up. When it comes to your personal goals, a review of your finances and estate should be at the top of your list. Proper estate planning can ensure that you have a stress-free year knowing you are covered!
The purpose of a will is to outline your assets and determine how they will be distributed, as well as who will be in charge of managing affairs. Some key components to include in this document are:
Another important (and often overlooked!) aspect of estate planning involves naming a power of attorney. This individual is someone you trust to make decisions for you should you become unable to do so due to injury or illness, whether temporary or otherwise. Power of attorney documents are created for you by a wills and estates lawyer (or notary in Quebec) as part of your estate plan.
Through Manulife Mortgage Protection Plan (MPP), you have the opportunity to add a portable insurance policy to your mortgage that helps protect your loved ones and your home should something unexpected happen to you. Unlike bank insurance, MPP is a portable life and disability product that you can take with you, from lender to lender and property to property. This gives you the utmost future flexibility and is unlike bank insurance products which tie you down exclusively to them. To ensure you get the best rate at renewal, you must have invested in an insurance product like MPP that will give you the freedom to move!
Mortgage life insurance will protect your family's future by paying out your mortgage should the mortgage holder pass away. Manulife will also make your mortgage payments while your claim is being adjudicated, so there is no added stress for a loved one at an already difficult time. Mortgage disability insurance will take care of your mortgage payments plus property taxes if you become disabled. Disabilities from sickness and accidents are relatively common and will affect 1 in 3 borrowers throughout their mortgage amortization. Manulife provides budget-friendly payment options, the ability to top-up your coverage and so much more.
These are all important aspects to consider to ensure your estate and family will be provided for should something happen. While never a fun topic, it is an important one and the better prepared you are, the better off your loved ones will be.
I would be happy to discuss coverage with you to ensure peace of mind for your family and their future.
As we enter the New Year, it’s always fun to reflect on the previous twelve months and take a look at what is trending as we move forward.
If you’re unfamiliar with the Pantone of the Year, it is more than just a colour to paint your walls. Since 2000, the Pantone Colour Institute has been indicating a colour of the year and, for many, this is seen as a representation of the current moment in time helping us to reflect on the culture and state of the world. Think of it like a snapshot in time!
For 2024, the Pantone color of the year is “Peach Fuzz”; which is notably a warm and cozy hue to feed and nourish the soul.
During this post-pandemic period of turmoil around the economy, mortgage industry, and housing market, many of us are currently in need of more nurturing and comfort. This colour signifies the importance of caring and community even more as we enter 2024.
As the calendar turns over, take inspiration from Pantone to make the New Year one of comfort, healing, and peace for yourself and those around you. With interest rates forecasted to drop towards the latter half of 2024, housing and job markets set to stabilize and inflation slowly reducing to normal, we have some stability to look forward to.
To ensure you can make 2024 as comfortable as possible, don’t hesitate to reach out to me for mortgage advice. Managing your finances can be a great way to reduce stress and leave time for more important things! Renewals are on the rise, and this can be a great opportunity for you to rebalance your mortgage contract, review your interest rate and terms, and update your payment schedule to make the most of your monthly cash flow.