LIVE A MONSTER LIFE DO YOU KNOW THE REAL COST OF MOVING? "IF ONLY WE COULD PILE IN THE CAR AND JUST GO..." Phone: Fax:

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Gladys Farmer
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1 LIVE A MONSTER LIFE DO YOU KNOW THE REAL COST OF MOVING? "IF ONLY WE COULD PILE IN THE CAR AND JUST GO..." 20 Holly St, Suite 302, Toronto, ON M4S3B1 Fax: Toll20Free: Holly St, Suite 302, Toronto, ON M4S3B1

Many MonsterMortgage.ca clients contact us because they have saved enough money to move up into a bigger home and in some cases a more desirable neighbourhood.

2 Many MonsterMortgage.ca clients contact us because they have saved enough money to move up into a bigger home and in some cases a more desirable neighbourhood. Regardless of what economic variables exist at the time, we are inevitably asked the same question Is now a great time to buy my next home? Our answer always includes something like this that depends, are you aware of your real cost of moving? The real costs of moving include some expenses people often overlook. THE FACTS THAT YOU BANK WON'T TELL YOU Let s assume you live in a condo valued at $750,000 today and are looking to purchase a new resale home in the $1,500,000 range in Toronto. With today s low interest rates, let s see the real cost of moving from one home to another. 20 Holly St, Suite 302, Toronto, ON M4S3B1

3 MORTGAGE PENALTY THREE MONTHS INTEREST OR INTEREST RATE DIFFERENTIAL PENALTY (IRD) Most people simply see these costs the day they visit their lawyer and get the keys to their beautiful new home. Quite often, the client is surprised because they are asked to bring in $20,000 more than their anticipated down payment. A trusted mortgage agent should be able to sit down with you and run through all of these costs; if not, find yourself another mortgage professional to work with. Usually, one of the biggest surprises existing mortgage holders are faced with when considering moving up is the cost of breaking their existing mortgage. Dependingonthe mortgage product you are in you might be faced with what is called the interest rate differential penalty (or IRD). If your current mortgage is with a chartered bank, you have a fixed rate mortgage, and there is a significant amount of time reaming in your term, your mortgage is most likely going to be hit with an IRD. Don t despair, because you do have some choices. One option would be to ask your mortgage agent if you can move your mortgage with you to your new property and increase the mortgage amount. We call this a blend and extend. YouavoidtheIRDasaone-timecostbyblendingitwithyournewmortgage payment. You need to be careful with this calculation because there are a few moving variables here including: your existing mortgage rate the new money you need along with the new rate for that money. Once these are blended, this becomes your new mortgage rate. The term is often extended because this positively affects the interest rate. What your bank may not tell you is that this is not always in the best interest of the client. The blend calculation for each bank is different. Not all banks offer their fully discounted rates on the new money. They know IRD is complex to explain and understand this policy. 20 HollySt,Suite302, Toronto, ON M4S3B1

4 TAKE A LOOK AT MATH* Here is an example of one of our clients whose mortgage was with one of the chartered banks. Their fixed rate mortgage was at 3.00%, the rate was 1.75% (initial discount) off the posted rate with the bank and the mortgage was simply not transferable under any circumstance. The remaining term of their existing mortgage was three years and the balance of the mortgage was $650,000. If they broke their existing mortgage and moved to a 3-year term fixed rate mortgage with a closed term (the rate was at 3.25%), they would have to pay the IRD. Here s how their IRD was calculated: 1Calculate the rate difference 2 Calculate the IRD The client was obviously outraged. By understanding your bank s policy before making your mortgage decision you can avoid many potential pitfalls. In this situation, breaking the original mortgage would have cost the client $29,250. Even if you believe the potential $29,250 penalty was disclosed to the client before signing (in this particular case the client claims their bank did not) the fact is, many penalties and policies involved with mortgages today are so detailed that even bank representatives have a hard time understanding exactly what it is they re asking homeowners to sign. And at the end of the day, if you are moving into your new home the last thing you want is a gift from your bank in the form of a $30,000 expense. (*Please note that the numbers used in the above examples are meant for illustration purposes only. Mortgage amount and years remaining on the mortgage may vary and the interest rates are subjected to change.) 20 HollySt,Suite302, Toronto, ON M4S3B1

5 TO MOVE OR NOT TO MOVE? There are significant costs to moving and your mortgage agent should make you aware of what ALL those costs are. In some cases, renovating your home can make a lot more sense financially. How can you make the right decision for you and your family? The answer is simple. Your mortgage is likely the largest investment you will ever make. Be sure to leverage the FREE ADVICE* a trusted mortgage agent can provide to help you better understand how to use your mortgage to make financial decisions that will help you both save and earn money for as long as you own your property. MonsterMortgage.ca can help you plan and manage your mortgage strategy so you can live the life you want, whether you are considering the purchase of a new property or looking to renovate your existing one. (*MonsterMortgage.ca s services are free based on approved credit.) Call us before your next move, we will help you keep more money in your pocket so you can live the life you want. 20 HollySt,Suite302, Toronto, ON M4S3B1

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