How to Become Mortgage Free Sooner?
Crush your Mortgage Loan and Pay It Off in Less Than Half the Time!
Paying your mortgage off the traditional way can take anywhere from 25-40 years and you will end up paying twice the purchase price of your home if you do not come up with a strategy. We teach our clients to love your mortgage and to start using it as a wealth building tool and to look at it as a gift and not a bad debt.
Here are some effective ways to pay off your mortgage sooner, build equity faster, and save thousands in interest. Our goal is to make money simple again and free you from any financial stress and anxiety that leaves you with less time and energy and focus on the things you love to do and the important people you love in your life. Wouldn’t it be wonderful if you could learn how to become your own money manager, be able to mentor your friends and family and teach them all they can do with their newfound surplus? Learning these foundations is transformational when you see yourself reach to your full potential! When you are in a position to now have to worry about money, then you are able to find more purpose and more meaningful contributions to the world.
Here are just some of the plans we can teach and share with you to achieve wealth sooner. The Wilson Teams core values are about financial education and we have spent decades learning the best strategies that financial lenders have to offer. There is no one size fits all so its important to go through your finances and goals in order to choose the pathway that best suits your needs.
The All-In-One Mortgage
Instead of making extra payments, consider switching to a mortgage that pays off the principal faster, without costing you anything more. An all-in-one mortgage combines a line of credit with a chequing account, to reduce the interest costs and pay off your mortgage in as little as half the time. When you deposit your pay into the all-in-one account, you will pay your bills as you normally would, and leave the remaining pay on the line of credit. While you are not using your money, the funds are used to reduce your daily loan balance. Over the life of the loan, this can save hundreds of thousands of dollars in interest.
Our latest client was just able to pay their home loan off in 3.8 years by properly setting up this strategy. It starts with a very conservative budget that we will assist in planning, and we will run the numbers in our calculator to give you an approximation of how long the loan will take to be paid off. It’s important when you are setting yourself up for this type of product that you are a consumer that is organized and disciplined to create the maximum benefit and stick to your goals. The whole idea around these projections is that we are going to use the surplus of funds that will be created once we have allotted for our expenses, living and lifestyle.
It’s time for you to start building up your nest egg for retirement and be on your way to financial peace!
The Property Investor Strategy
This strategy is all about how to buy investment properties and use their capital appreciation over time to help you pay off your home loan in 10 years. You will learn how to do this with no cash deposit available as we will teach you how to finance and purchase your first investment property. We will also share our successful, proven strategies on how to find the perfect home, explain how to get a tenant in, how to have it paid off by someone else while not having to spend one dollar out of pocket.
By doing this, you will give yourself the opportunity to grow your wealth, literally while you sleep, as the investment property grows in value each year. We are going to focus on how you can leverage the equity that you have in your home to purchase an investment property and show you the taxable benefits that come along with owning real estate. We have helped hundreds of clients build millions in wealth as well as create a secondary income well before retirement. If you are a Canadian who has accumulated a considerable amount of equity in their home in the past few years, then we will show you how to access that equity and leverage it with a multiplier effect. We will explain the smartest way to structure an investment loan and properly secure the financing so that you can maximize your returns and minimize your risk.
This webinar is the blueprint of what we believe to be one of the most effective strategies to find, fund, and benefit when it comes to residential property. We will show you the power that one property has and how you can do this three times over the next 3 years. The financial framework to this is designed for people who already have a mortgage, who own a home, and have built up equity. You must have a good credit score and have a combined income of $100k/year in order to utilize and implement this opportunity.
Ready to start your journey? Click Here to watch the Video
Inflation Hedge Strategy
Understanding the Inflation Hedge Strategy
This is a strategy that is being used by thousands of Canadians across Canada. It is used to pay off your mortgage in record time but it is also used to protect you from future payment shock. Payment shock is when you enter into a lower mortgage rate when you first take our and sign a mortgage contract with a bank or lending institution. The other side of taking a lower rate that is well below the normal or average historical rates is when your 5 year term / contract is up for renewal and the interest rates have gone up, then it can make it difficult to manage the new mortgage payment with higher interest rates.
The idea behind the Inflation Hedge Strategy is that you are not only protecting yourself from rising mortgage rates, but you are also putting yourself in a position to pay the mortgage off years sooner than taking a traditional 25 or 30 year amortization. If you can position yourself to pay the mortgage rate at a min of .50% higher than what your current rate is at then you are not only paying much more principle from your loan but you are also staying in front of inflation. It will also allow you to keep up with your rising income.
Now imagine you do this every year! Increase your mortgage payment by .25% or .50% per year by using your pre payment privileges. Pre payment privileges can be used to increase mortgage payments up to 20% depending on your lender. Here is an example of what this looks like using a current mortgage rate of 2.99% for 5 years and a loan amount of $400,000 over 25 years : The monthly payment would be $1896 per month
Now If you increase your mortgage payment 1 day after you close your mortgage by 1% , which would act as if you are paying a 4% mortgage rate and that would increase your mortgage payment by $210 per month and you continue to do this every single year for the next 5 years or even after year 1 you can increase in .50% then you are keeping up with inflation and taking years off your home loan. This new payment, after day 1 would be a monthly payment of $2104 per month.
If you were to increase your home loan / mortgage payment to hit a rate of aprox 6% and the payment was able to get to $2700 per month over the 5 years then you could save as much as $70,000 and 10 years off your mortgage.
Our team can teach you how this is done and structure a plan with you that helps you to stay on track. All of this can be done using the pre payment privileges from you lender and the great thing is that even if you increase over time and during the 5 years you find yourself in a circumstance that does not all you to have the additional funds going to the mortgage then you can . always reduce or reverse the mortgage payment back to its original amortization payment.
Call the Wilson Team Ottawa Mortgage Brokers today to set up your mortgage strategy
Secondary Dwelling Unit Strategy Unit AKA SDU
If you’re planning to buy a home or you own a home now, you may want to consider the advantages of generating some additional monthly cash flow to pay off your mortgage or create a second income from a secondary suite.
A secondary suite – also known an in-law suite because it may be ideal for an elderly parent – is a self-contained apartment that is part of your home, but has a separate entrance. We at the Wilson Team of Mortgage Professionals would be delighted to discuss your personal situation and help you determine if a home with a secondary suite is right for you.
A secondary suite could also offer a great way to buy a home with another person with each of you having your own equity stake in the property to make purchasing less expensive and allowing to get into the market. You could do this with a family member or have a joint venture partnership.
Who wouldn’t be tempted by the opportunity to earn additional income or get your mortgage paid off in record time? On average, the cost to create this secondary dwelling unit (SDU) is approximately $50,000 to $100,000, with the money going toward creating your legal windows, private entrance, own bathroom and kitchen, along with any additional work that needs to be done. You could spend a bit of additional money and have it fully self-contained, using your separate hydro meters. Not only do you get all the benefits, but it will also increase the value of your home significantly.
The major advantages to buying a home with a secondary suite relate to your mortgage:
The most advantageous option for secondary suite income can be used to pay off your mortgage more quickly or defray the monthly expense so you can invest your net dollars elsewhere. Let’s say you have an existing mortgage of $300,000 and you want to create an SDU which will cost $100,000 for a fully contained legal second unit. We can refinance your mortgage by adding that $100,000 to do all the renovations, which will make the new total mortgage $400,000.
If we put the new amortization at 25 years with a rate of 2.69%, then your mortgage payment would be $1,829 a month. If you were receiving $1300 in rental income and you used the funds to pay off the mortgage directly — as a direct pre payment — then you could pay the mortgage off in 10 years if you also incorporated the accelerated bi-weekly payment into your mortgage payment.
If you just kept the $1,300 you received in rent, then you effectively made your mortgage payment $529 a month, which you could reinvest your net income to build your retirement alongside your mortgage.
- Let’s say you add $100,000 to your current mortgage:
If there is already an existing SDU in the home you want to buy, the potential extra income from the secondary suite can help you qualify for a larger mortgage than you might get otherwise, allowing you to live in a more desirable area; and allow higher affordability. It may ease your path to mortgage approval, since the Canadian Mortgage and Housing Corporation will now consider 100 per cent of the gross income from a two-unit property when a loan application is submitted for insurance – if the owner occupies one of the units.
In this case, the unit must already exist when you buy. It can add 5-to-10% to your pre-approved mortgage amount and you would benefit by greatly reducing your mortgage expenses.
- Secondary suites are also ideal for families and for aging in place. Adult children who want to look after their parents, but give them some privacy, may ask them to live in the secondary suite. This can not only help the parents, who may not have enough income in retirement to pay markets rents, but can also help adult children pay their mortgage down or offset monthly expenses. It is also a wonderful way to keep the family unit together
- Another way an SDU can help, which has become very popular, is that seniors who own their homes are now using the CHIP mortgage to create a secondary suite in their home to create an income for themselves. If they took out $100,000 on a CHIP, they would not have to make any payments and can add up to $1,500 of income to their monthly retirement income. It also allows them to help take care of the home maintenance such as snow removal and grass cutting or having another person or couple to help with the day to day maintenance.
- The rental income can allow them to remain in their homes, while the upkeep of the suite won’t be as taxing physically. Secondary suites can also be used by adult children who move home or live at home during graduate school, or by live-in caregivers.
If a secondary suite sounds appealing to you, the Wilson Team is well-versed in multi-unit homes. We can assist you in determining the overall cost of building an SDU and the value it can add to your home after completion. We will help walk you through a plan to best structure the project to meet your financial goals. If you are tempted to renovate and add a suite, first determine whether the renovation costs will pay for themselves quickly enough to suit your budget and whether you plan to live in the home long enough to reap the rewards.
Some considerations in making your SDU a legal unit:
Before you take the plunge, be sure that your secondary suite is legal. The Ontario government listed these requirements in its Second Suite Guide (http://www.secondsuites.info/wp-content/uploads/2017/02/Feb-27-2017_ACK_Creating-Guide.pdf):
- The residence must be at least five years old;
- The house must be detached or semi-detached (different regulations exist for adding suites to row homes);
- The exterior of the home cannot be significantly altered;
- The secondary suite cannot be larger than the rest of the home;
- It must have its own separate entrance, bathroom, kitchen and living facilities, although a hallway and laundry facilities may be shared;
- It must be up to fire code, have a minimum 15-minute fire rating, and at least two escape routes, one of which must be a door leading to the outside; and
- It must meet municipality parking requirements.
Broker Vs Banker
We wanted to quickly put together a comparative list of what bankers and brokers can each do for you. We want you to have all the necessary information when it comes to your mortgage so you can make an informed decision. Please check out the list below;
The internet has never made it so easy for a consumer to type in “lowest mortgage rates” “best mortgage rates” or anything to do with shopping mortgage rates. In fact, when it comes to the housing market, it’s the No. 1 Google search, followed by the search for a mortgage calculator!
With the mortgage market one of the most competitive industries in the country, you can rest assured that every single mortgage lending company or bank will all offer rates within 0.30% of each other. This means that if a financial institution is not competitive then they are just not chosen as lenders.
There are many sites online that flash the mortgage rate like shiny jewellery, and it’s unfortunate that this is what our industry has led you to believe is the most important factor when it comes to your mortgage. Especially because it is the largest investment you will ever make. At the Wilson Team, our motto is that mortgage rates do not build wealth, knowledge does. If you are dealing with a mortgage broker, you are absolutely guaranteed to get the lowest rates no matter what because everyone is competing for your business but what will that rate cost you ? You can also take the rates you see online or on your phone to your bank and get them to come down or match the rate or at least come close.
It has never been easier to search for a low rate, which can be done in minutes; however, the cost to physically approve, underwrite, administer, and fund a mortgage loan has never cost the financial institutions more. There is very little spread in the interest rates because the banks buy the money and sell it back to you. I know I wouldn’t lend my money at these rates! The profit really isn’t in the mortgage rate itself; the profits come from the contracts that you are signing with the bank and the business model. The more expensive the business model, then the higher the cost of the CONTRACT will be – you’ll discover this in the fine print.
If you had a choice to:
- take a $400,000 mortgage with Bank A and have to break or renegotiate the term in the 3rd year, they tell you the cost to do so would be $20,000 (5% of the mortgage loan) or
- take a $400,000 mortgage with Bank B who only charges you $3,200 to break or renegotiate the mortgage in the 3rd year…
which would you choose? What if you wanted to add additional funds to your mortgage because you are buying something more expensive or you need to access money from your home? Bank A tells you to take on a new second mortgage with a new term, rate and amortization, which is different from your pre-existing mortgage.
Or, would you choose Bank B that does a good old fashion blend and increase where you still only have one mortgage, one term, one rate?
What about renewing? Lets say you are renewing in an environment where rates are increasing , and you need to take advantage of a renewal rate a month before yours expires… Bank A charges you 3 months interest and Bank B just charges you interest on the amount of days left of the expiration. Which one would you choose?
What if you have to renegotiate your mortgage mid-term and Bank A declines your application and has a contract clause that says that you cannot go to another bank Meanwhile, Bank B who declined you as well, however, you are welcome to shop elsewhere for very little cost to cancel a mortgage contract. Which one would you choose?
What if you chose a mortgage product solely for the interest rate alone, and now you cannot use one of our mortgage strategies in order to pay your home loan off 10 times faster than the typical 25-30-year mortgage contract. You see, the interest rate could end up costing you thousands and thousands of dollars that you are not aware of because you do not understand mortgage loans and money, which is why you hire a specialist to work on your behalf – AKA the Mortgage Broker/The Wilson Team 😊.
At the end of the day, our job is to present you with the best opportunities based on your unique situation and lifestyle. We evaluate every single application and offer financial coaching that will enable you to meet all your goals over the next 5-to-10 years. There are many other ways that each contract differs from lender to lender. But, the most important thing is that you have connected with our team to ensure that your equity is being protected and your goals are being reached. Working with a broker gives you independent, unbiased advice.
If all banks were alike, there would be no need for competition. Banks business models “we sell all things money “. Credit cards, securities, insurance, mortgages, stocks, and the list goes on. However, some of the banks competition just do mortgages which is what they specialize in. So when I go get home and auto insurance, I go to a broker to review all my options, policies, costs, coverages, claims departments etc. When I buy life insurance, I go to an advisor who has access to all the carries to review all the options, underwriting, coverages etc – This is he importance of working with an expert because that is what they do all day long. They do not dabble in it. They are direct and not full retail. This does not mean a bank won’t be your best option, because banks do 50% of the mortgages but you have to know what you need as a product, so you don’t get stuck. There are two things I look at in a any mortgage. Costs to exit, Cost to make changes mid way, cost at renewal, costs to increase, costs to lock in , and many other options for product, terms and rates when it comes to the structure I need to fulfill my life goals. Rate is the truly one of the last things I look at as an investor. We use mortgages to build wealth. We have many strategies to do this.
Most people do not realize that when we take your mortgage application, there are six paid employees between us and your lawyer. We are licensed professionals and we work for YOU, not the banks. It’s no different than getting sick and having your doctor send you to a specialist who only studies that particular illness, or looking for a lawyer and ensuring that you are working with a lawyer that specializes in real estate or family law. When you are looking to take on the largest asset and debt in your lifetime, we would hope that you would choose a specialist in your marketplace.
Mortgage brokers work with all lenders that sell mortgages. That includes the big banks, credit unions, insurance companies and monoline lenders. Each business model is different, which makes the contracts very different. Seventy-eight per cent of Canadians will make a change by the 3rd year of their mortgage. Our goal is to ensure that you have flexibility and options and that you are protecting your money. We like to ensure that you have an exit strategy that will work anytime, no matter what challenges or new endeavors life brings.
The cost of our services is covered by the lender, unless we are working with a client who needs alternative lending options. We do not get paid more money to sell you a higher interest rate. Therefore, it is always in our best interest to ensure our clients get the lowest rate, right up until their closing date.
We are excited to work with you on your journey!
Questions? We at the Wilson Team of Mortgage Professionals would be delighted to answer them.