When making a deposit at my local bank I could not help but notice their latest offering on their bank machine screen; “Get pre-approved for a mortgage online in five minutes”. It’s not quite that simple though. The questions only take five minutes to answer and then a mortgage specialist will follow up with you in 24 hours.
So you’ve been approved, but conventional mortgages can be complicated. You are locked into your debt with traditional payments. Paying it off sooner can lead to fees and huge penalties. Your home equity is not always accessible. The lowest “interest rate” being offered may not translate to the “lowest amount of interest paid”. Basically, the bank controls your mortgage, not you.
Think about this: Why do you have separate chequing accounts, savings accounts, mortgage and a line of credit, all with their own sets of fees? You can take better control of your finances by getting rid of all these separate accounts and going to something that integrates all of your accounts into one for better cash flow and debt management.
So why the pressing need for Canadians to manage cash flow and debt management? Simply because the amount of debt the average Canadian family holds today is at an all time high, with the average debt to income ratio at 163.3%.
What do you do about this? People tend to be focused on their home, their mortgage, their mortgage interest rate, renovations needed and their monthly cash flow or lack thereof. It is difficult to plan for retirement planning and portfolios when there is no free money to go that direction. There are options available besides conventional mortgages that reduce fees, interest payments and pay off debt faster while allowing you to afford retirement planning.
Financial planning should not just focus on portfolios and retirement planning. Nor is it just about short term investment performance. Discussions need to occur around a holistic retirement planning process that helps reduce financial stress and enhance your goals while considering your current family needs.
Your home can be used as an active investment asset, using home ownership as a savings tool. Being in the right “mortgage” can increase home equity faster, be an effective debt management plan, offer enhanced tax efficiency and enhance long term savings.
Today there are tailored debt management programs to balance income, lifestyle, surplus cash flow, concern about rising interest rates and balancing “good debt” with “bad debt”. For seniors with a home paid for but with limited other savings, they can consider leveraging their home equity to provide tax-free income. Funds freed up this way are tax-free and in today’s low interest environment historically cheap to borrow. As well, this debt management program can be used as fraud protection and a savings account for mortgage free homes.
This is where one needs to seek out a trusted professional and develop a customized banking, investing and lifestyle plan to ensure a comfortable retirement today or in the future. Times are changing, and conventional isn’t always best when there are newer and more flexible products out there that make financial sense.
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