How do you make your mortgage work for you?
Well, if you are looking for it to do more than just keep a roof over your head, Jeff Evans, mortgage broker with Canada Innovative Financial – Mortgage Architects, has some suggestions.
One is the Manulife One Mortgage.
“It is a fairly unique and powerful product,” says Evans, who has been providing mortgage services to home buyers and homeowners since 2007. “Sometimes, people have a little difficulty understanding it, but it can provide results that can be beneficial for a lot of people.”
One of the main differences between it and most other banking products is that when you make a mortgage payment, the line of credit component within the mortgage is automatically increased, Evans explains.
“You don’t have to request any increases in the loan amount.”
Pretty much every other financial institution in the marketplace has a static line of credit.
“The fixed mortgage component decreases in the amount owing, but the line of credit doesn’t increase,” Evans says.
Normally, clients simply expect to make their monthly mortgage payments and have their balance owing reduced accordingly.
“With the Manulife One Mortgage, they can have funds available for investments if an opportunity comes up,” Evans says.
“That type of flexibility surprises many clients. It kind of blows their mind and many don’t really have a full grasp of what they could do with it.”
One strategy, sometimes referred to as the Smith Manœuvre, can be a powerful way to reduce your mortgage quickly.
“It’s a method of leveraging referred to as a tax-deductible mortgage,” Evans says.
Under the plan, when you make a principal payment on your regular fixed rate component of the mortgage, it automatically becomes available on the line of credit.
“Whenever that takes place, you can borrow the funds from the line of credit and put it into a qualifying investment which is tax-deductible,” Evans says. “It can effectively have the mortgage paid off in full, depending on the return on investment you obtain, in half the normal time, without any extra payments being made.”
The main risk comes with losing money on the investment, so identifying your risk tolerance for your portfolio is key.
“You will also need an investment advisor and accountant to make sure you stay onside with the CRA (Canada Revenue Agency),” Evans says. “It’s a more sophisticated product for someone who is more investment savvy,” Evans says. “But it can save people money.”
For more information on how to get your mortgage to work for you, visit bc-mortgage-broker.ca or call 604-381-1292.