Toronto Real Estate and Neighbourhoods Blog | Move Smartly

Key RRSP Strategies and Mortgage Financing

Heather in HomeBuying, Money

RRSP season is here and at this time of year, Canadians grapple with issues about finding money to contribute, deciding what to invest in, and determining whether to forfeit the RRSP contribution in lieu of the ‘saving for a house fund’. I am offering the following suggestions:

1. Short on money? Consider your home equity to maximize your RRSP contribution.

Higher real estate values may offer a chance for many to maximize their RRSP contributions by tapping into existing home equity. Of the almost $526 billion in RRSP room available to Canadians in 2006, only $74 billion was actually used, according to Statistics Canada. With a home equity line of credit, a homeowner can withdraw funds at relatively low interest rates on an as needed basis for the purpose of increasing RRSP contributions, including unused contributions from previous years.

Tips for Paying Off Your Mortgage Faster

Heather in Money

For most Canadian homeowners, paying off their mortgage as quickly as possible is a top priority. Paying down extra principal in the early years by whatever means possible can shorten the life of your mortgage – and dramatically lower the interest you'll pay over the long haul.  Here are a few tips on how to make this happen: 

1. Increase your payment annually to the most you can afford

The upside is that most lenders will allow you to reduce it again to the previous level if it turns out to be too great a burden or your circumstances change.

2. Prepayments give great return on investment

If, for example, you pay an average of 6.0% in mortgage interest, for each $1,000 by which you reduce your mortgage principal, you will save $60 in after tax cash every year. 

3. Utilize your RRSP-driven tax rebate as a mortgage prepayment method

Even if you can only prepay annually, make sure tax refunds are set aside for paying down your mortgage.  Many Canadians borrow (at prime) to buy an RRSP to ensure the maximum rebate.  When applied to the mortgage principal, this refund is a "gift that keeps on giving".  Combining the refund with the tax-free interest earned on the RRSP over the subsequent years will quickly outpace the short-term interest costs of the RRSP loan.

The 5 "Cs" of Credit

Heather in Home Buying, Money 

Ed. Note.  We are very pleased to welcome a new blogger to the Move Smartly team.  Heather Paterson is an experienced mortgage professional who is passionate about educating consumers.  Based in Toronto, Heather practices in the area of Mortgage Financing with Invis.

THE FIVE "Cs" of CREDIT

Ever wonder how lenders evaluate mortgage applications? How do they determine if you are a good credit risk? The answers can be found in the 5 “Cs” of Credit. The lender wants to make sure that there is sufficient assurance that a person can and will pay back a loan and therefore must consider the 5 "Cs" of Credit each time it approves a mortgage.

Realosophy Launch

Welcome to realosophy.com!  We hope that you are as excited as we are about our new Toronto HomeBuyer’s website.

We are a group of young consumers and professionals who once wondered why HomeBuying wasn’t more fun, open and easy to understand.  Then we decided to do something about it—something we call Realosophy.