Getting your mortgage to work for you
Your RRSP can help you pay down your mortgage
If you have extra money to invest, you may be considering whether it’s smarter to contribute to an RRSP or pay down your mortgage. The solution: do both. Your RRSP contribution may generate a tax refund, and you can use that money to help pay down your principal faster and save thousands in mortgage interest.
Say, for example, you have a mortgage of $100,000, amortized over 25 years. If you make a $5,000 RRSP contribution, receive a $2,000 tax refund, and apply that refund to your mortgage principal, you can reduce the time it takes to pay off your mortgage and save on interest costs.
Tips to help you pay down your mortgage faster:
Reduce your amortization period when you renew your mortgage
As shown by the examples below, a shorter amortization offers significant saving in interest
Prepay your mortgage every year
Whether or not you renew your mortgage this year, you can reduce your mortgage principal by making a lump sum prepayment of up to 10% of the original mortgage amount, once a year. If you prefer to spread out your prepayment, simply increase your regular mortgage payments by 10%.
Double-up© your payments, when you can.
RBC Royal Bank offers a flexible way to prepay your mortgage with the Double-Up option. Every time you make a mortgage payment, you can choose to double up by making an extra payment equal to your regular payment on any or every payment date. The amount will go directly toward reducing your principal. It’s a great way to use extra money, such as a tax refund or salary bonus, to help pay down your mortgage. You can make Double-Up payments throught Online Banking or by calling 1-800-Roayl
Mortgage rates are low, but how can you benefit if your mortgage is not up for renewal now?
If you are concerned about mortgage rates going up, consider an early renewal option from RBC Royal Bank. The amount you could save by locking in today’s low rates, particularly for a longer term, often outweighs any prepayment charge thtat may apply. And remember, if you have an open fixed-rate or variable rate mortgage, you can renew at any time without a prepayment charge.
Have interest rates dropped since you took your mortgage? Then consider the advantages of our Blend-and-Extend option:
Lock in a lower rate for a longer term than the term remaining on your current mortgage – generally, the term must be longer by six months or more than the term remaining on your mortgage.
Extend the term of your fixed-rate mortgage by blending your existing mortgage rate with the current rate for your next mortgage term.
Blend-and-Extend protects you from mortgage rate increases during the remaining term of your mortgage. You’ll also enjoy stable, affordable mortgage payments for a longer period of time.
Thinking of selling your home this year?
Here are tips to help you maximize the market value.
Make small repairs, such as leaky faucets, burned-out bulbs and squeaky hinges. Potential buyers do notice these details.
Consider excluding certain items from the listing, such as major appliances, microwave, window coverings or ceiling fans. You can then use them as a bargaining chip in a counter-offer.
Sweeten the deal for both you and the buyer. For example, if they're a first-time buyer and you're moving to a condo, include you lawn mower and gardening tools in your counter-offer.
If there are major defects in your home, don't try to hide them. If a major problem is revealed during a home inspection, it could jeopardize the sale. You could also face legal action if your home is sold and a major defect or structural problem is discovered after the fact. Describe any major defects in the listing agreement but add that the price has been reduced accordingly.
Check your survey (certificate of location). It should accurately reflect any structural changes you've made while owning the house, such as additions, garages or decks. If no improvements have been made, your survey may stay in effect indefinitely, although some provinces require routine updates.
When planning for the future, it pays to expect the unexpected…
Many Canadians feel that their group plans will provide enough income should something occur, or that government subsidies will suffice. Would you be able to cover your outstanding financial obligations on 30% less income? At RBC Royal Bank, we offer the security of HomeProtector© life and disability insurance to ensure you are protected for the big things in life.
When you sell your home, should you take your mortgage with you…or leave it behind?
When you sell your home, you may find that the rate and term of your existing mortgage is attractive to potential buyers. Or, you may want to transfer your mortgage to your new home. With RBC Royal Bank, you have the choice of either taking your mortgage with you or leave it behind.
Our Portability option lets you transfer the interest rate and all the existing terms and conditions of your current RBC Royal Bank mortgage to your new home, subject to a credit review and property appraisal. By "porting" the mortgage, you automatically avoid any prepaiment charges due to breaking your mortgage early. You may also qualify to add on to the mortgage if you require a larger mortgage amount.
Our Assumability option lets you offer your mortgage to a prospective buyer who can take it over with the purchase of your home, as long as he or she qualifies for a RBC Royal Bank mortgage. If you have a low-rate mortgage, this option could prove to be a good tactic for attracting buyers in a competitive market.
For more information, visit www.rbcroyalbank.com/mortgages and click 'Take It Or Leave It'
You can use the equity in your home to help finance renovations
Like many Canadians, the value of your home may have increased over the past few years. Or you may have paid down your mortgage to the point where you have substantial equity in your home. If so, you may want to consider a Mortgage Add-On as an affordable way to pay for renovation. It's a great way to finance a bigger project.
With a Mortgage Add-On, you can borrow up to 75% of the current appraised value of your home, or up to 90% of the apprised value if your mortgage is insured by the Canada Mortgage and Housing Corporation (CMHC) or GE Capital Mortgage Insurance Company (Canada).
When you borrow an additional amount during your current term, your existing rate for the remainder of the term and the current rate on the new "add-on" are blended together to five you a weighted annual interest rate. Your mortgage payments are adjusted to reflect the new principal and interest rate.
This gives you the convenience of one regular mortgage payment. You can even use your Mortgage Add-On to help fund other goals such as a vacation home, post-secondary tuition, or debt consolidation.
Payback of typical home renovations
Home renovations can increase both the comfort and value of your home. Some renovations pay back more quickly, in terms of the percentage of the cost of the renovation that is reflected in an increased value of the home when it is sold. Here are some typical examples:
Interior painting and decor..........73%
Main floor family room addition....51%
New furnace of heating system...48%
Source: Appraisal Institute of Canada national 1998
Renovations and Home Value Survey
One in four Canadian homeowners intends to undertake major renovations within the next five years. The top projects being considered are kitchen and bathroom renovation.
Source: Canada Mortgage and Housing Corporation (CMHC), "Housing Facts", August 2002 .