What To Do, What To Do
Hi everybody – its TOM here. I’ve taken over the newsletter this round to provide you with a personal story that might be helpful to some of you.
“What to do, what to do”…
That phrase, used over the last few centuries, expresses a universal human feeling of being “in a pickle.” While I do LOVE me a good Polski Ogorki pickle, or for those of you Polak purists, Ogorkova (Dill Pickle Soup), I have been dreading the reality that my mortgage was coming up for renewal and my net rate was going to be higher and thus my payments would jump.
Yep, just like many of you, our clients, I was faced with higher rates (assuming you had a fixed rate) or a worse discount (if you are still in a variable mortgage). I had a mix of both, referred to as Hybrid Lending, so not only did my fixed rate segment go up, my variable rate segment discount also dropped causing that segment’s net rate to go up.
Prior to renewing (see the end for what I decided to do with my renewal), I faced these key questions:
Do I need more money? Should I take out equity from my home?
Do I need a lower payment? (Yes, please!)
Do I qualify for a refinance?
Do I go fixed rate this time, or do I stick with variable, or do I do a bit of both?
Clients come to us at TOM + ANAIS to ask for our professional opinion on their lending structures and what to do, but who does TOM go to for advice on his mortgage? No, not some secret organization of underground mortgage gurus and psychics, not Doctor Google, or some AI tool. The answer is someone he fully trusts to smack him in the face with an honest and factual opinion — his business partner ANAIS!
Sometimes when facing big decisions, even though you know the right answer or action, you just need to confirm what you are thinking. So when that happens, we tend to confide in others we trust like family or friends. While this can be comforting, it can also lack impartiality.
TOM + ANAIS strives to provide honest, valuable, and professional opinions to our clients to improve their financial well-being while building on strategic advice.
So, after much deliberation, discussion, chocolate, tears, pickles (yes, that is my comfort food) and wine (my other comfort food), I decided to go fully variable on my renewal.
Reasons for this include:
ANAIS told me to… She DID!
With prime rate being cut, and more cuts expected over the next 12 months, it’s a good strategic holding pattern to be in (you can convert a variable term to a fixed term for free for most lenders).
I think fixed rates will drop in the next 12–18 months. How far is up for debate, but I personally think into the 3.50% range.
With the recent poor jobs numbers in both Canada and USA, and lagging economic activity as well as geopolitical tensions, I believe variable offers greater benefit vs. a fixed term at this time.
In short, keeping it flexible right now can make a lot of sense.
