How Money Management With Your Mortgage And Your Home Equity Build Wealth.
Single Moms, if you are doing a little money management and you need some help, here is some important information for you. This is a must read. Mortgage is the largest debt that most people will ever have. You should make it a high priority to manage your mortgage prudently, it is your money and it is important to your financial success and personal well-being.
Tips To Help With Your Money Management:
Facts you should know about Mortgages. When buying a home it is best if you have at least 20% down payment on the property. This way you don’t have to pay the CMHC insurance in Canada. In other countries I am sure you have a similar type of insurance, please check with your bank for clarification of the name of the mortgage insurance and the minimum required loan to value.
The definition of CMHC…
Canada Mortgage and Housing Corporation, it’s a Crown Corporation which administers the National Housing Act.
If your down payment is less than 20% you must have mortgage insurance. It insures the lender against the possibility of you defaulting on your mortgage. Canada Mortgage and Housing Corporation is the principal source of mortgage insurance. G.E. Capital also provides mortgage insurance to many of Canada's financial institutions.
The CMHC insurance is a percentage of the purchase price which is added to the mortgage amount. This amount is calculated in your monthly, bi-weekly or weekly, mortgage payment, whatever payment option you choose.
Thus, most home owners would not be able to own a home if a required down payment of 20% was mandatory. Your down payment in Canada can be as little as 5% down; as long as you are qualified in all other aspects and a mortgage insurance company such as CMHC agrees to insure you, you can get a mortgage.
Remember, all investment are risky and real estate is no exception. money management mean that you must always be on top of your finances. Prices go up and down and so do interest rates. Don’t assume that prices will always climb.
Therefore, when buying a home with less than 20% down you are leaving yourself open to serious financial challenges when house prices fall. With less than 20% down, if house prices fall you could end up with a higher mortgage than what the house is really worth.
Money management, mortgage advice that will shock some of you… Never lock in your mortgage for a fixed term. For example: (1 year, 5 years etc.) especially now with the constant fluctuation of interest rates. A variable rate mortgage (VRM) should always be the mortgage of choice.
Bankers will try to convince you to lock in your mortgage for a five year term. This secures the bank’s interest, and if you break the mortgage, there is a penalty dollar value that you would have to pay.
Never buy mortgage life insurance from a bank. When you purchase insurance from a bank to cover your mortgage, you are buying and paying a fixed amount of insurance on the purchase price of your house. Nevertheless, when your mortgage reduces over time, you continue to pay the same premium for a reduced amount of life insurance coverage.
To Manage your money properly is to always buy insurance separately. This way you can control the amount of coverage and premium that you will pay over the life of your mortgage. Keep in mind that this insurance is not an investment, it is an expense. So, you want to get the most for your buck, keep payments low, shop around and look for deals.
Surprise…Never leaves equity in your home if you want to become wealthy. Buying a home with a big mortgage is one of the biggest investment risks most of you will ever make in your life time.
Therefore, to minimize the risk, diversify your investments and increase your net worth, always shop around for the best mortgage. Mortgage terms and rates vary depending on the lending institution. Shop around for the best mortgage. Don’t be afraid to negotiate to get the best terms and rates.
Three Steps You Can Take To Maximize Your Home Equity.
1. Obtain a line-of- credit, using your home as collateral.
2. Ask your bank to open on-line discount trading account for you.3.
Use the proceeds from your line of credit to invest in shares of Canadian Banks and other well managed financial services companies. Note:
History has shown that after the bottom-out of every stock market decline, the market goes up by 45% after 6 months, and 85% after 8 months. If we are not at the bottom now, then we surely are close to it. Don’t wait…invest now!
Note: Interest payments on loans from your bank are tax-deductable when you file your tax returns.
Make it a job when it comes to your money management, especially in these unstable economic times. If you have a current mortgage and you think you are paying too much because you are locked into a 5-year term. You need to try to get out of it and move into a VRM.
Your banker should be able to help you to calculate the penalty for a smooth transition to a VRM. You must always remember it is your Money, don’t let anyone else decide how you should manage it. You owe it to yourself to ask a lot of questions to ensure you get the best deal for your buck.
If you need clarification with any of this information, you can consult with a financial advisory. You have all the right questions that you can quarry right here. Most of the time there is no consultation fee, so do your homework and save money. Take advantage of the free consultation, this means that you are definitely managing your money wisely.
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