As part of your overall financial strategy, consider your mortgage strategies to access financing, reduce risk, and protect your real estate investments.
A good mortgage plan helps you keep moving forward regardless of market volatility and allows you to weigh capital gains versus losses in your favour. When dealing with your largest single asset class, you need to prepare for the worst possible situations, such as family illness, job loss, or increasing interest rates.
Look at probable contingencies and ask:
- Can I pay for the mortgage if other unexpected expenses arise?
- Could I end up needing to sell my residence or investment property or cottage?
- Can I weather a real estate market downturn that could reduce the value of my property by 5 or 10%?
Other important considerations:
- Run amortization schedules 1, 2, and 3% higher than the current market rate to see if you can pay for a higher escalating monthly mortgage payment just in case the economy shifts.
- Consider not locking in a mortgage (keeping it open or only using a line of credit with the freedom to govern principal payments). If you determine that your plan must allow you to take advantage of selling, you may avoid future penalties.
- Assess risks associated with a property such as an old condo with a special assessment (offloading the expense to all the owners collectively).
- If you are nearing retirement, where do you want to live? Ask questions relative to your lifestyle preferences: “Is shopping, a park, a library, or city-life within walking distance?” or “Is there a major hospital nearby, and access to an airport or major roads such as the 401?”
The financial arrangements for your real estate can be affected by external influences, such as interest rate movements, and personal factors, such as your income and your ability to gain loan approval. The bottom line is that you must service any mortgage debt and pay down the mortgage.
Let us help you assess your situation as we help plan your best mortgage fit to suit your circumstances.