I try not to take being a home owner for granted.
I know home owning is totally impossible for many people, and borderline so for many others, so as I sit in my home office and look at the gorgeous trees outside in our back yard, I do feel fortunate.
When I first started writing about saving money, it was with the idea of it being about saving for a home, but it evolved beyond that into a goal to help people of a wide range of income and lifestyle levels be smarter consumers.
My blogs and books may overlap with some advice on sites about frugality but it’s actually not my main theme. My angle is more about how to be a regular consumer who makes modest changes that add up significantly. (The economy might not be too happy if we suddenly all lived on $14,000 or less per year!)
A perfect example is making modest changes to your mortgage if you are also a home owner.
When my husband and I purchased our first home, a tiny cottage in East Vancouver (see the attached picture – yes, it was very small!), we weren’t totally savvy about mortgage rates and we took advice from a mortgage broker, whom we’d only “met” by phone. We didn’t realize at the time that the interest rate we took was somewhat higher than average, and I still don’t know if that was due to a faulty credit rating, or because he didn’t try hard enough on our behalf, or some other reason, but we accepted it without question. We were just thrilled to have gotten a home, the smallest, cheapest single family dwelling in all of Vancouver, seriously.
Soon enough though, my budgeting brain kicked into gear. The broker suggested that we get a 40 year mortgage… gulp, I feel nauseous even typing that. Of course I said “no way” and hubby agreed. It would have only made payments a bit less painful each month but ultimately added on tens of thousands of dollars in interest. And dragged out our obligation unnecessarily. Those term limits aren’t even allowed now and I understand why, though I also think 25 year mortgages for most in our neck of the woods are rather challenging. Our down payments alone would fully buy a home in many other towns in North America.
At that time, 30 year mortgages were still on the table so we went with that, but with two modest modifications of paying every two weeks instead of twice a month and increasing payments by about a hundred dollars each time, we shaved off several years, getting down to about 26 years owing before any time even passed. And that’s a lot different from 40.
As we moved over the years, we had other issues with that broker like not being informed of the ding we’d get when remortgaging and not knowing we were even shifting companies because he didn’t tell us(!). So we ended up saying farewell. Tears were shed, bonds were broken. But we managed.
Now we know more. We know the differences that small percentage variances can make. And we know we need to be looked after as individuals by a broker who gets to know us and who maintains that relationship beyond the one signing.
In another posting, I’ll tell you about the huge chunk of money I got back from a mortgage company that overcharged us for cancelling the mortgage with them. And maybe we’ll chat about property transfer taxes some day – one of my biggest pet peeves in a town with crazy high real estate costs. One or two percent on a million dollars is a lot of extra cash for folk to have to dish out up front.
In the meantime, if you’re in the market, I’d recommend doing some comparison of numbers – e.g. you can Google “mortgage comparison calculator” and check the differences between interest rates, amounts paid, frequency paid, length of mortgages, and different carriers. We’ve never gone with a “real” bank for a mortgage as the rates of other companies have been much better in our experience. Whichever path you take, hopefully you can find a broker to give you the best advice.
One quick example of how to save in the big picture is the difference between paying $784 every two weeks vs. $1454 once a month that can add up to $8000 saved in interest and a mortgage paid off four years sooner, for just that modest change.
Our remortgaging will come up next year and we’ll be checking in with the hard working, award winning Sabeena Bubber of Xeva Mortgages (www.sabeenabubber.ca), knowing we’re in good hands. In the meantime, we are hoping that the interest rates will still be low, once again being reminded to not take any of this for granted.
We may have stepped it up quite nicely from that first little shack of a house, through no accident, but through hard work, some solid sweat equity of several family members, and dollar stretching and saving… nevertheless, we still recognize that we are very fortunate to have a home.