It Was The Best Of Times, It Was The Worst Of Times

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness – Charles Dickens

The opening line from the Dickens classic, A Tale of Two Cities is an appropriate summation of the current Canadian economy. The media reports daily on the doom & gloom of the Canadian economy. Contraction of 3.4 percent in the fourth quarter of 2008, January job losses totaling 129,000, exports down, financial markets down, a global financial crisis. The expectation that things will get worse, before they get better. So why is this “the best of times”?

Low interest rates. At 48 years of age these are the lowest rates I am likely to see in my life time. What a tremendous opportunity to take advantage of affordable money. It’s no surprise that the Canadian real estate market has cooled, since consumer confidence is at an astounding low. The resulting decrease in mortgage interest rates has brought on an onslaught of refinance applications. The refinancing trend started in October and has become more popular in 2009. With lower interest rates estimated to stay through the end of this year, financial institutions hope the rush to refinance continues. Of course business is brisk, just look at the numbers.

A typical $150,000 mortgage @ 5.5% with a 25 year amortization results in a monthly mortgage payment of approximately $915 per month. Compare this to a $170,000 mortgage at 4.25% with a 25 year amortization. The monthly mortgage payment? Approximately $915 per month. The number one way to gain some advantage from today’s economy is to refinance your home. It could be the quickest $20,000 of tax free money you will make in your life time. Use your windfall to pay down high interest credit card debt, take a vacation, invest it in an investment that pays a higher return than your new mortgage rate, or just save it for a rainy day. The choice is yours.

One might consider becoming a mortgage holder on a neighbour’s home, someone who can’t qualify for the superior rates due to bruised credit, or an unforeseen setback, such as job loss. These mortgages can be held within a self directed RRSP and as they are secured by the actual real estate, the associated risks, compared to investing in the stock market, are considerably less.

The surge in home refinancing is expected to have a positive impact on the Canadian economy. When you refinance your home, you’re contributing to making things better. Some mortgage lending companies have been able to stop or slow down layoffs and some have even begun hiring again in order to handle the torrent of applications. We would be happy to assist the cause and help you with your own “personal stimulus package”.

Call or email today for a no cost, no obligation, consultation. Make the worst of times, the best of times.

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