Canadian Capital News:

Save Money on Long-Distance

December 13, 2004

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As immigrants, we tend to make a lot of overseas calls to friends and family, making long-distance among our most expensive monthly bills. At one time or the other, we’ve been customers of pretty much every phone company in Canada. Over the years we’ve learned to avoid the big phone companies like the plague. Not only are their per-minute rates not competitive, they also charge a monthly fee that varies from $0.95 to as much as $4.95!
Currently, we use Yak (no monthly fees!) for calls within Canada and to the US and Reliance for our calls to India. Their services are reliable, the quality is very good and the rates are easy on the budget.

Pre-pay your Mortgage

December 12, 2004

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Most mortgages come with pre-payment previleges (e.g. upto 20% of the principal in any 12 month period). Since mortgage interest is not tax deductible in Canada, making a pre-payment is a very smart move, especially in the early years of a mortgage. When a pre-payment is made, it immediately reduces the principal balance on the mortgage. The interest portion of future payments also decreases. It is equivalent to getting a tax-free guaranteed return on your money.
Let us assume a $150,000, 5% mortgage, amortized over 25 years. Let us also assume that we pay an extra $150 every month. Over the life of the mortgage, we can save more than $30,000 and become mortgage-free 6 years earlier. A very useful mortgage payoff calculator can be found at Dinkytown.net.

Save Money on Morgages

December 11, 2004

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When we bought our home, we first went to our local bank to arrange a mortgage. The bank offered us 1% off their posted rates for being “valuable clients”. However, Invis, a mortgage-broker who can arrange a mortgage from many sources, was able to offer a mortgage 25 basis points less than the “best rate” from our bank.
For a hypothetical example of a $150,000 mortgage with a 5 year fixed-term, amortized over 25 years, a 4.8% mortgage will be about $2300 cheaper over 5 years than a 5.05% mortgage.
A lower interest-rate should not be the only consideration in a mortgage. Banks may offer to set-up a secured line of credit along with a mortgage. They may offer better pre-payment terms. However, it is wise to shop around and haggle a little bit and put some extra cash in our pocket.