Amortization Options

Mortgage Tips Arman Sandhu 23 Feb

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 (a longer lifetime equals more interest, whereas a shorter lifetime equals less interest but also bigger payments).

Amortization Benchmarks
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 35 years!

Benefits of a Shorter Amortization
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.

Benefits of a Longer Amortization
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.

Let’s Chat!
We would be 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 a DLC mortgage expert today!

BC Real Estate prices ‘uptrend’ at beginning of 2024

Latest News Arman Sandhu 16 Feb

VANCOUVER — The BC Real Estate Association says there was a nearly 30 per cent increase in home sales last month compared with January 2023, while prices were also up.

The association says 3,979 sales were completed last month, for an average price of $957,909, a more than 10-per-cent jump from the year before.

Ogmundson says declining mortgage rates and further interest rate cuts expected to be made by the Bank of Canada this year are both “driving sentiment in the market and bring pent-up demand off the sidelines.”

The Fraser Valley and Greater Vancouver saw the greatest year-over-year jumps in unit sales and dollar volumes.

Sales in Chilliwack last month topped $144.6 million, a more than 73-per-cent jump from last year, while in Greater Vancouver sales reached $1.78 billion, a 48.4-per-cent increase.

This report by The Canadian Press was first published Feb. 13, 2024.

The Canadian Press

Article Link BC Real Estate Association numbers point to market ‘uptrend’ at beginning of 2024 (msn.com)

Arman Sandhu

6 Things for Co-Signers to Consider

Mortgage Tips Arman Sandhu 12 Feb

Are you thinking about co-signing on a loan? If you’re looking to help out a family member or loved one, this is a great way to do that as a co-signer can help overcome stress testing and borrowing limits.

However, it is important to be aware of the implications when co-signing on any loan.

  1. Credit History: If you are acting as a co-signor or guarantor on any loan, you essentially allow them access to your credit history. This means, if the borrower is late on the payments or there are issues with the loan, it will affect your credit score as well as theirs.
  2. Legal Implications: Always be sure to understand the taxes, legal and estate situations that go along with co-signing, should the borrower fail to pay. A lawyer can help you review the loan agreement and advise of any items you may need to take note of.
  3. Timeline: Understanding how many years the co-signer agreement will be in place and what your options are for making changes will help you determine the scope of the loan and if you are able to make changes at any point should the borrower become able to assume the entirety of the mortgage on their own in the future.
  4. Personal Income Tax: Depending on the loan, you may have an obligation to pay capital gains taxes so it is a good idea to review your personal tax situation with an accountant prior to signing off on the co-borrower agreement to ensure no surprises.
  5. Relationship with Borrower: This is a vital consideration for going in on any loan. Do you trust the individual? Are you aware of their financial situation? Are you willing to potentially put yourself at risk to assist them? These are all important questions as many of us may want to help out family or loved ones, but it is important to ensure that the individual is reliable.
  6. Future Finances: Lastly, consider your future finances and if you had any plans in the future that could be impacted by an additional loan. How much flexibility do you need for yourself and your family? If you have plans to refinance for a renovation or make changes to your own mortgage, being a co-signor could affect your options.

Co-signing for a loan always requires careful consideration as it is a large responsibility. However, when done correctly and with people you trust, it can be a great way to assist family members or loved ones with their goal of homeownership. If you are considering co-signing on a loan and have any questions or would like more clarity, please don’t hesitate to reach out to a DLC Mortgage Expert today!

 

Published by DLC Marketing Team

 

Arman Sandhu

How to Talk to Your Kids about Finances

General Arman Sandhu 2 Feb

Financial independence is a critical skill for future success that your children will not learn anywhere else. Not only does financial literacy help your children have more success in life, but it allows them to move out sooner and it avoids delaying your retirement with additional expenses to support them.

So, how do you teach your children about money?

  1. Review Your Attitude Towards Money: The first and most important thing is to examine your own attitude towards money. Are you a penny pincher? Frivolous spender? Do you buy on impulse, or take a long time to make a purchase? How much debt do you have? Your financial habits will shape your children. To ensure that you are setting them up for their best financial future, parents need to consider what messages they are sending with their own money habits.
  2. Give Your Children an Allowance: Providing an allowance to your children (especially one in exchange for chores) is an age-old way of teaching your kids about money. A good guideline is $1.00 per year of your child’s age. For a 10-year-old, this would be $10 per week.
  3. Teach Your Child to Save: If you are giving your child $10 per week in allowance for chores, encourage them to put even just $1 per week into a piggy bank. In six months, show them how much money they have saved and talk to them about why it is important, and what they can do with that larger amount now.
  4. Encourage Kids to Think Before They Buy: While it’s hard to get a 10-year-old excited about an RRSP, there are other ways to help them plan ahead. One is to encourage them to think about their purchases before they commit. They saw a toy on TV and they have to have it – teach them about how advertisements are designed to make you want something. Ask them to wait a week. Do they still want it?
  5. Involve Your Children in the Family Finances: It is more valuable than you might think to let your kids see and hear you discuss financial planning; let them be part of opening and paying bills or planning vacations. Explain why and how much you pay for certain things and discuss affordable choices. This helps them be part of the conversation and will work to instill a sense of financial responsibility as they grow up.

Remember, you are the best example to your children about money. Don’t be afraid to share the ups and downs with them. Be patient with your kids, but don’t give up! The best thing you can do as a parent is to promote financial security and independence.

 

Published by DLC Marketing Team

Arman Sandhu