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Your RRSP can help you pay down your mortgage
If you have extra money to invest, you may be considering whether it’s smarter to contribute to an RRSP or pay down your mortgage. The solution: do both. Your RRSP contribution may generate a tax refund, and you can use that money to help pay down your principal faster and save thousands in mortgage interest.
Say, for example, you have a mortgage of $100,000, amortized over 25 years. If you make a $5,000 RRSP contribution, receive a $2,000 tax refund, and apply that refund to your mortgage principal, you can reduce the time it takes to pay off your mortgage and save on interest costs.
Tips to help you pay down your mortgage faster:
Reduce your amortization period
when you renew your mortgage
As shown by the examples below, a shorter amortization offers significant saving in interest
Prepay your mortgage every
year
Whether or not you renew your mortgage this year, you can reduce your mortgage principal by making a lump sum prepayment of up to 10% of the original mortgage amount, once a year. If you prefer to spread out your prepayment, simply increase your regular mortgage payments by 10%.
Double-up© your payments, when you can.
RBC Royal Bank offers a flexible way to prepay your mortgage with the Double-Up option. Every time you make a mortgage payment, you can choose to double up by making an extra payment equal to your regular payment on any or every payment date. The amount will go directly toward reducing your principal. It’s a great way to use extra money, such as a tax refund or salary bonus, to help pay down your mortgage. You can make Double-Up payments throught Online Banking or by calling 1-800-Roayl
Mortgage rates are low, but how can you benefit if
your mortgage is not up for
renewal now?
If you are concerned about mortgage rates
going up, consider an early renewal option from RBC Royal Bank. The
amount you could save by locking in today’s low rates, particularly
for a longer term, often outweighs any prepayment charge thtat may
apply. And remember, if you have an open fixed-rate or variable rate
mortgage, you can renew at any time without a prepayment
charge.
Have interest rates dropped since you took
your mortgage? Then consider the advantages of our
Blend-and-Extend option:
Lock in a lower rate for a longer term than
the term remaining on your current mortgage – generally, the term
must be longer by six months or more than the term remaining on your
mortgage.
Extend the term of your fixed-rate mortgage
by blending your existing mortgage rate with the current rate for
your next mortgage term.
Blend-and-Extend protects you from
mortgage rate increases during the remaining term of your mortgage.
You’ll also enjoy stable, affordable mortgage payments for a longer
period of time.
Thinking of
selling your home this year?
Here are tips to help you maximize
the market value.
Make small repairs, such
as leaky faucets, burned-out bulbs and squeaky hinges. Potential
buyers do notice these details.
Consider excluding certain items from the
listing, such as major appliances, microwave, window
coverings or ceiling fans. You can then use them as a bargaining
chip in a counter-offer.
Sweeten the deal for both you and the buyer.
For example, if they're a first-time buyer and you're moving to a
condo, include you lawn mower and gardening tools in your
counter-offer.
If there are major defects in your home, don't try to
hide them. If a major problem is revealed during a home
inspection, it could jeopardize the sale. You could also face legal
action if your home is sold and a major defect or structural problem
is discovered after the fact. Describe any major defects in the
listing agreement but add that the price has been reduced
accordingly.
Check your survey (certificate of location). It should accurately
reflect any structural changes you've made while owning the house,
such as additions, garages or decks. If no improvements have been
made, your survey may stay in effect indefinitely, although some
provinces require routine updates.
When planning for the future, it
pays to expect the
unexpected…
Many Canadians feel that their group plans will provide enough income should something occur, or that government subsidies will suffice. Would you be able to cover your outstanding financial obligations on 30% less income? At RBC Royal Bank, we offer the security of HomeProtector© life and disability insurance to ensure
you are protected for the big things in life.
When you sell your home, should you
take your mortgage with you…or leave it
behind?
When you sell your home, you
may find that the rate and term of your existing mortgage is
attractive to potential buyers. Or, you may want to transfer your
mortgage to your new home. With RBC Royal Bank, you have the choice
of either taking your mortgage with you or leave it
behind.
Our Portability option lets you transfer the
interest rate and all the existing terms and conditions of your
current RBC Royal Bank mortgage to your new home, subject to a
credit review and property appraisal. By "porting" the mortgage, you
automatically avoid any prepaiment charges due to breaking your
mortgage early. You may also qualify to add on to the mortgage if
you require a larger mortgage amount.
Our
Assumability option lets you offer your mortgage to a prospective
buyer who can take it over with the purchase of your home, as long
as he or she qualifies for a RBC Royal Bank mortgage. If you have a
low-rate mortgage, this option could prove to be a good tactic for
attracting buyers in a competitive market.
For more
information, visit www.rbcroyalbank.com/mortgages
and click 'Take It Or Leave It'
You can use the equity in your
home to help finance
renovations
Like many Canadians, the
value of your home may have increased over the past few years. Or
you may have paid down your mortgage to the point where you have
substantial equity in your home. If so, you may want to consider a
Mortgage Add-On as an affordable way to pay for renovation. It's a
great way to finance a bigger project.
With a
Mortgage Add-On, you can borrow up to 75% of the current appraised
value of your home, or up to 90% of the apprised value if your
mortgage is insured by the Canada Mortgage and Housing Corporation
(CMHC) or GE Capital Mortgage Insurance Company
(Canada).
When you borrow an additional amount during
your current term, your existing rate for the remainder of the term
and the current rate on the new "add-on" are blended together to
five you a weighted annual interest rate. Your mortgage payments are
adjusted to reflect the new principal and interest
rate.
This gives you the convenience of one regular
mortgage payment. You can even use your Mortgage Add-On to help fund
other goals such as a vacation home, post-secondary tuition, or debt
consolidation.
Payback of typical home
renovations
Home renovations can
increase both the comfort and value of your home. Some renovations
pay back more quickly, in terms of the percentage of the cost of the
renovation that is reflected in an increased value of the home when
it is sold. Here are some typical examples:
Interior painting
and decor..........73%
Kitchen....................................72%
Bathroom.................................68%
Exterior
painting........................65%
Flooring
upgrades......................62%
Window/door
replacement..........57%
Main floor family room addition....51%
Fireplace addition......................50%
Basement
renovation.................49%
New furnace of heating
system...48%
Source: Appraisal Institute of Canada national 1998
Renovations and Home Value Survey
FAST
FACT:
One in four Canadian homeowners
intends to undertake major renovations within the next five years.
The top projects being considered are kitchen and bathroom
renovation.
Source: Canada Mortgage and Housing
Corporation (CMHC), "Housing Facts", August 2002
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