Home renos 2010

Whew… I got my $10000.00 home renos done before the deadline for my $1350 tax credit. I paid for it cash and as such had little cost because the money was earning .25% in the bank. My net cost then was about $8650.00 . I am sure the renos added value to the home in excess of that amount but the convenience of a balcony off  the second floor is far more important to me as I do not look at my home as an investment. I should be relaxed and happy but my wife apparently has other plans. It seems the kitchen needs an overhaul as well as one of our bathrooms. My estimate ….about $15,000.00…. and no tax credit this year to offset the cost! Oh and she has also decided that her car needs replacing even though I have assured her that 1990 was a very good year for Oldsmobiles and she runs the risk of having to deal with less experience in a newer model.  Any way add another $20,000.00 to my 2010 needs and I now have no more money earning  .25% that I can use. What to do?

Wait my mortgage is coming due for renewal in October. What if  I rewrote it and added the $35000.00 to the balance ? I know my home is not a piggy bank but what if I could add the $35000. , keep my payments the same,  and cut down the amortization by 5 years? The only way this could happen is if interest rates were at an all time low….and they are! I still have another problem. I need to start the renovations before October. Luckily for me some of stores are offering 0% financing for up to 1 year. I can start the renos and pay off with my plan at no cost in October. But the new car… If I can put off buying it until October maybe I can convince my wife that 1990 was a better year than 2010.

Is Your House Your Home

  The instability in our economy today is partly the result of us losing sight of the fact that our house is our home. In the world we live in the house has seen soaring market values which has encouraged people to treat their home  as a piggy bank, drawing from it when ever a need arises for a new toy or a hot stock market tip. The reverse of this is when market values plunge they lose their ” savings/spending ” account and react with despair.

It hasn’t always been this way. There was a time , not that long ago when people bought a house to be a home to raise and nurture a family. They never had the home appraised to see it’s current value nor were they interested in whether the value went up or down. It was their families home. If they had to have a mortgage it was considered to be a step to owning their home free and clear. Budgets were made to speed up the process and it was a grand day when they could burn their mortgage.

So how does the first time home buyer react to our  present conditions ? Prices are presently lower than they have been for several years , interest rates are at an all time low, our government is dishing out all types of real concessions and it has never been easier for a young couple, looking to raise a family, to purchase a home. When that decision is made just realize… your parents and grandparents may have been right! Choose a house that can be a home, talk to your mortgage broker about the best plan available to get rid of that mortgage quicker, treat the home as your refuge ..not a piggy bank.

Canada’s Renovation Tax Credit

               So you did the Mortgage Math from the February 5 column and you decided that your mortgage may be similar to the example given. You have contacted your broker and he/she or Lawrence himself agree that you should refinance. But wait …there is another savings that you should consider including in your refinance package. 

The Canadian government recently announced that you could temporarily get a tax credit of up to $1350 for renovations done to your home( 15% of reno cost to a maximum of $1350) What a way to build value to your home . An $8100 reno to the bathroom that you have been waiting three years to finish partially paid for by our federal government! Add this to your savings on refinancing and …Yikes!! it’s practically free!

Mortgage Math

Wow has the mortgage market changed! Today you can get a five year fixed rate for as low as 4.39% Good news for some one ready to renew their present mortgage or those of you who are in the market for a new home.

But how about those people who took out a 5 year fixed mortgage at +6% 3 years ago.Should you look at refinancing today?

Here is an example of Mortgage Math that may apply to you.

Your old $300000 mortgage @ 6% …Amortization   35 years…Balance $291,500…                                         

Payment  $1695.76/month…Balance in 2 years $ 285,000 .

Your refinanced mortgage @ 4.39 %… Amortization   32 years…Balance financed $291,500

Payment $1407.97 saves $287.79… Balance in 2 years $282,700 saves $2300    

Total savings are $287.79 x24 months=$6906.96 +$2300=$9206.96

Sounds too good ? You are right because your present mortgage company is going to want to recoup some lost interest via either a 3 month penalty or an interest rate adjustment. So for our sakes lets assume they ask for a 3 month penalty.

6% divided by 12 x 3=1.5%x$291500= $4372.50. In this case you would have saved $9206.96-$4372.50=$4834.46 over the next 2 years PLUS you would have the security of knowing what your rate is going to be for an additional 3 years in a growingly uncertain market place.