Swings in economy are to be expected

Last week, the Bank of Canada surprised some Canadians when it lowered the overnight lending  rate from one to 0.75 per cent.

However, the decision to lower interest rates should not have been as big of a surprise as it was, nor should the fact that the banks have failed to lower their respective prime rates.

On the day before the rate drop, I told two separate groups of real estate investors – totaling 60 people  – that, in my opinion, there was as good of a chance that rates would decrease as there was they  would increase. The next morning, the Bank of Canada proved me right.

Interest rate increases looming for borrowers

Heading into the home stretch of 2014 and toward 2015 is an opportune time to review or create a mortgage plan.

A mortgage plan — whether you're buying a home, already in one, or planning on purchasing revenue properties in the next few years — is vital to you and your family's overall financial health.

The last several years have been unique as a result of the 2.99 per cent mortgage craze. Banks have been highly competitive, lowering fixed rates to historical lows in an attempt to gain market share.

And in today's low-interest-rate environment, it's not a question as to whether rates are going to increase, but when. Borrowers need to position themselves in a way they can absorb higher interest rates and/or be able to still pay off their mortgages faster.

There's more to it than just buying a condo

In last week's column, I discussed a client who recently purchased a rental property that will    return 17 per cent annually on just the cash flow and mortgage repayment.

That's a pretty good return, especially when considering that return will increase as more principal is paid down, and as the property starts to appreciate in value.

However, there is more to consider than just buying a condo and renting it out. Our client is a smart buyer who followed three basic rules when it came to buying her investment property. While these rules are simple, they are also important.

Can be smarter than stocks or bonds
Calgarians may be surprised to find out just how profitable revenue properties are in this city – even in consideration of claims housing prices are already overvalued.

In fact, annual returns of 17 per cent, or more, before factoring in appreciation or tax benefits are not uncommon. All you need to get started is a 20 per cent down payment, which can be as little as $30,000 – or $15,000 if you partner with someone – decent credit, and the ability to think long term.

Freedom is as easy as one, two, three

To be mortgage-free faster, it is up to borrowers to take the necessary steps to accelerate  payments. And it's not as simple as waiting until your lucky six numbers come up in the lotto.  Paying off a mortgage sooner is all about strategy and automation.

Here are three ways to cut your mortgage down to size.

Understanding how they affect rates, penalties
Pre-payment privileges are the single-most overlooked aspect of a mortgage by borrowers.  Consumers, for whatever reason, seem to gloss over them as if they are a feature of the  mortgage that will never be used.

However, pre-payment privileges are important. They are what allow a borrower to reduce his or her amortization from 25 years to 10 years. They can also affect interest rates and payout penalties, which is why a better understanding of how they work, is important.

Low rates and product features

For decades, the process of selecting a mortgage has been the same: go to the bank, choose  between a fixed or variable and don't ask any other questions.

Oh how things have changed. A mortgage is no longer just a mortgage.

There are many things to consider when it comes to finding financing. The first and foremost is whether the bank you love for your everyday needs is the one that is right for your mortgage needs. Ask what rates your bank will offer you without any haggling. You may find they're not as attractive as elsewhere.

How to avoid costly mistakes before you have keys in hand

 Many homebuyers do not realize that even with an approved mortgage and after meeting the  necessary financing conditions, they are not guaranteed a loan until it has funded on the  closing date.

There are several things to consider to ensure a mortgage closes smoothly, and on time.

The first thing is avoiding the need to take on additional credit. While it may be tempting to load up on new furniture and appliances, do not apply for a loan to buy them. Even an interest-free, no-payment loan can affect whether someone qualifies for a mortgage. Wait until you have the keys to your new house before borrowing money.