Financial Fitness

How to Get theWorks™ Working for You

By Interior Savings
April 6, 2017

A few weeks ago, Peter and I had discussed how to take advantage of low mortgage rates when you’re already part-way through a fixed-rate mortgage term. We made some calculations (because in some cases a lower rate does not result in paying less interest!) and we discussed Interior Savings’ Blend and Extend option.

Well, the very next week Peter’s parents, George and Lily, came in to see me. George and Lily are also long-time Interior Savings members and mortgage-holders and had been talking to Peter about mortgage rates, borrowing, and flexible loan products. It turns out George and Lily had some out-of-the-ordinary medical bills coming due and were concerned about where they would find the extra money.

Like many homeowners in the Okanagan, George and Lily haven’t paid off their mortgage completely but they have built up a lot of equity in their home. Lily had “googled” borrowing against home equity and found it might involve discharging their current mortgage and re-registering their mortgage to also cover a loan, which would come with new rates and all sorts of fees.

Lily was already concerned about George’s recovery from that fall he took skiing, his slow rehabilitation, and the mounting medical bills. Now she sat across from me hoping for a silver bullet that would make borrowing to cover the bills easy.

Her silver bullet was, in fact, her Interior Savings mortgage and theWorks™.

I was happy to explain to Lily that, like all Interior Savings mortgages, her mortgage was more ‘program’ than ‘product’, and a mortgage with theWorks™ is designed to be flexible and accommodate members’ borrowing needs.

Here’s how it works:

In a typical mortgage scenario, a lender registers your mortgage for a certain amount, say, $300,000 on a $500,000 property. This means a lawyer draws up a legally binding document that states you have borrowed $300,000 – you have registered a charge on the title of this property and this house.

No matter how much equity you build up in your home over time, your mortgage can’t exceed that original $300,000. You cannot alter, at any time, that original $300,000 amount. In order to borrow another $50,000, you’d need to register a new charge on the title for $50,000, or discharge your original mortgage and register a new charge, or mortgage, for $350,000. Either option comes with new rates, new legal procedures, and fees.

When we set up a mortgage at Interior Savings, we register a charge without a fixed dollar amount. There is no specific limit named when you register the charge on the title of your property. Which means your mortgage can ‘float’ with whatever equity you have available. You can add on any of our lending products, secured to your home, without having to cancel, re-register, go through lawyers or pay multiple fees. I explained to George and Lily that many of our members had, for example, their mortgage, a car loan, an RRSP loan, and a line of credit, all secured by the equity in their home through theWorks™. Every loan ‘product’ came with a competitive rate, and they could all be paid with one regularly scheduled payment.

And, for those members who have paid off their mortgage, we don’t always ‘discharge’ the mortgage so that down the road we’re able to provide financing for a move, renovations, a holiday, etc. The fact that we can do this without lawyers, title searches and additional fees saves our members headaches, hassles and money.

I saw Lily breathe a great sigh of relief. She was clearly pleased that their mortgage was automatically part of theWorks™ program which gave them an easy way to cover George’s new medical expenses. She appreciated that the repayment options, amounts, and schedules were flexible, that they could set up more than one term to reduce the risk of potential increases in interest rates, and that mortgage protection insurance, life, disability, critical illness and loss of employment insurance are all available for theWorks™.

George was pleased too, and asked if they could borrow for anything, like another ski vacation. The official answer is yes, although, from the look that Lily gave him, I decided just to let that question hang.

If you have questions about borrowing against your home equity, what’s available with theWorks™ or affording a new home, get in touch with one of our Mobile Mortgage Specialists. We’re happy to help!

 

Article contributed by Allan Gariepy, Mobile Mortgage Specialist with Interior Savings.