For your information - March 2008
By now you are likely aware that the Bank of Canada lowered the Bank Prime by a whopping 0.5% on March 4th, something we have not seen since 2001. In April, we may see another 0.5% cut to avoid any recessionary effects from the U.S. So far this year, Canada has produced jobs in record numbers, and building starts are significantly higher than expected despite our harsh winter, although economists feel it's only a matter of time before our exports are affected by the poor economic conditions of our biggest trading partner.
Currently inflation is not an issue and these rate cuts will make it easier for Canadians to afford homes. Most will capitalize on variable mortgages both now and likely for quite some time, which is currently at about 4.5%. This strategy has two benefits; the variable rate has averaged less than fixed rates over the life of a typical mortgage, and you can convert to any fixed term at any time, allowing one to react to market conditions and ultimately not miss out on any better mortgage choices. Conversely, fixed mortgages do no not let you make changes prior to maturity unless you are prepared to pay a penalty. Contact me to ensure your mortgage strategy is sound and you are not paying too much interest!
Mortgages also play an important part of your tax strategy. This is the time of year to ensure your tax planning has also been thoroughly researched ... a good accountant is worth every penny. Keep in mind that borrowing money is a great way to buy investments. The interest you pay on these loans or mortgages is tax deductible so in effect you will get "free" money back that would otherwise have gone to Revenue Canada. Many borrow to buy investments even if they have cash on hand just to take advantage of this tax rebate. Also keep in mind, that many of these investments pay monthly dividends that can cover your loan or mortgage payment. It's prudent to understand how to pay off your mortgage sooner and retire earlier so take the time to do your homework. Speak with your certified accountant, as well as check out www.smithman.net for some mortgage/tax deductible information. If you have a mortgage that is 75% of your property's value or less, then you are eligible to take advantage of the "Smith Manoeuvre".
With spring renovation season heating up, take a look at any energy-related projects that may qualify you for government grants. To help homeowners save energy, save money and help reduce greenhouse gas emissions, the Ontario government has created the Ontario Home Energy Retrofit Program. The program provides homeowners with grants of up to $5,000 for home energy improvements. Click here for more information.
As always, you and your friends are welcome to contact me anytime to ensure you are doing the right thing with your mortgage ... I look forward to any "Mortgage Planning" you, or someone you know, may require.
