mortgage freedom

Apple, RIM And Your Mortgage Freedom

June 29th is a special day for the following reasons:

  • 5 years ago, Apple's iPhone was launched. It was the birth of Blackberry's nemesis
  • Today is the first day after RIM announced major losses, delays in launching Blackberry 10 operating system and 5000 additional layoffs
  • It is also the busiest day for lenders in Canada as the highest number of mortgages close today

You might be wondering what's the connection between the above 3 points.  Last year, I was meeting with a few investment banker friends who, at that time, said RIM's stock was a buy since it's price of $16 was undervalued and the company had lots of cash.  Fast forward 9 months, RIM's stock is at $7.4 (June 29, 2012 stock price). It has lost half of its value.  It is important when buying a stock, mutual fund or investment property to buy based on economics: how much revenue is generated (sales of company, rental income a property demands), profits (net profit, cash flow after all expenses are taken into account) and potential appreciation (R&D and innovation for a company, solid area that will experience growth due to jobs, infrastructure or immigration).  Buying (stock or investment property) because someone said it is good to buy is speculation and could result in disaster. Do your own due diligence.

As for the Apple connection, emulating their drive to innovate and improve by continuously reviewing the mortgage, adjusting it and understanding the opportunities leads to financial freedom. Being complacent by getting a mortgage, setting a payment and forgetting about it would be following RIM's path.  There is more to mortgage than rates.

Having a vision (building a portfolio of positive cash flow properties or being mortgage free) and executing a plan would result in financial freedom and not arranging a mortgage on the busiest day for lenders.

To discuss how to achieve mortgage freedom or build your real estate investment portfolio, please contact me.

Getting A Mortgage Is Like Day Trading!

Have you recently shopped for a mortgage? Were you trying to choose the lowest available rate? Many Canadians shop based on "lowest rate" and I don't blame them.  When was the last time a homeowner sat down with a mortgage broker or banker to discuss a strategy for their mortgage?  I'm sure you will understand where I'm going with this, let's say you have $50,000 to invest:

  • How would you go about choosing a financial planner?
  • Would you choose a financial planner based on the stock/mutual fund price on that day?
  • How will you choose which financial planner gets to manage your investments if all them have the same stock/mutual fund price?

I believe the majority of people choose their financial planner based on their belief the planner can deliver the proposed strategy that will achieve their long term goals.

Now let's go back to mortgages, let's say you receive 3 different rate quotes which are exactly the same, how will you choose who will get the privilege of managing your debt?  If you have an asset manager shouldn't you have a debt manager?

I believe that a mortgage professional is ought to provide more than filling out applications and quoting rates.  They should provide a well executed strategy to achieve your desired mortgage freedom, a mortgage product that fits your changing lifestyle and a mortgage term based on current and projected economic conditions.

A stock is chosen by a day trader by timing the market whereas a mortgage is a vehicle to achieve your financial freedom.

To discuss your personal mortgage financing needs, please contact me.

How To Use A 40 Year Mortgage To Payoff A Mortgage In 20 Years

You might be thinking can I really use a 40 year mortgage to payoff a mortgage in 20 years.  The answer is yes. Here is a real example of a recent client case that I helped structure:  Client has one rental property which he was paying down aggressively by taking all the net cash flow ($400 monthly) and putting it down on the principal.  This might sound like a good idea, however it is inefficient.  Here is why:

  • Paying down an investment property aggressively reduces interest portion of mortgage payment which is tax deductible, therefore resulting in higher taxable income
  • Net positive cash flow can be used to pay down non tax efficient debt (home mortgage)

The solution for the client was the following:

  • Leave the investment property mortgage at its original 40 year amortization (which is still available for conventional mortgages)
  • Use the net positive cash flow ($400 per month) to paydown principal residence ($300,000 mortgage amortized over 30 years at 3.29% is reduced to 20 years of amortization saving $62,461 of interest payments)

The cash repositioning helped the client paydown their principal residence, save thousands of interest dollars and be tax efficient.  It is important when choosing a mortgage for your investment property, the right product is selected that will fit into your long term goal.  Please consult with your accountant regarding your taxes.

In conclusion, there is more to mortgages than rates.  If a mortgage product is used properly, mortgage freedom can achieved faster which is the goal of many homeowners.

To discuss your personal mortgage situation, please contact me.