Mortgage Matters

I have a relative who bought a house in downtown Toronto and paid the entire purchase price in cash. I still can’t quite grasp how he did it. (No, he was not wealthy. He worked in a small retail store. No, it wasn’t in the 1930s either.) For most of the rest of us, a mortgage is an essential for home ownership. Here’s some interesting articles I’ve read recently about mortgage matters.

While personally I disagree strongly with the statement “With the low interest rates available today there is often no benefit in continuing to rent while trying to save 20% to eliminate the CMHC fee.” I found the overview of mortgage types and terms very clear in Boomer’s article: “How To Pick The Perfect Mortgage.”

Collateral vs Conventional Mortgages
One thing that needs an article of its own to explain, however, is the difference between conventional and collateral mortgages. My parents and I had a conventional so I didn’t even know collaterals existed. I think some people are getting themselves into a collateral mortgage without really understanding how it differs from the old kind. In “Decoding Mortgages”  Marketplace tries to clarify the differences, and the disadvantages of collateral mortgages.

Mark Weisleder at The Star also discusses this topic in “Beware the pitfalls of collateral mortgages.” He makes the interesting statement “Some lenders are offering collateral mortgages in a “negative option billing” manner. Unless you are informed enough to say you want a conventional mortgage, you will be asked to sign documents for a collateral mortgage.” Buyer beware indeed!

Home Hunting
Krystal Yee reminds us that we should think about what we really want and need from a home before buying in How I Chose My First Home.Sometimes picking the right home reduces the cost and the mortgage required.

Paying Off the Mortgage
This is a popular topic among finance writers.

The Passive Income Earner summarizes many of the best methods in Mortgage Strategies. He does mention one high risk possibility called the Smith Manoeuvre. May I cordially suggest you don’t try that one? Thank you.

Mortgage Vs HELOC
Jane discusses her challenge in choosing between a Mortgage and a Home Equity Line of Credit, raising important concerns about both in “Maybe I Should Get a Mortgage.”

Related Reading

Join In
Do you have a mortgage? Conventional or Collateral or do you know? Any tips or tricks to share with the rest of us? Please share your experiences with a comment.

Sometimes Spending More is Wiser than Getting a Deal

Anyone who knows me knows that I am cheap, er, wisely frugal. I refuse to pay more than $5 a pound for chicken and generally will only pay $3. I have to make my husband take the kids out for ice cream because I just can’t make myself pay that much for a single cone when you could get a pint of the best stuff for the same price. Yet I saw an ad yesterday that made me even me stop and think there are times when a wise person will spend more not less.

The ad in question was for a waterproof iPad case. It showed someone, at least in theory, holding the encased iPad underwater to take a photo of a freckled red-headed Caucasian kid swimming in a pool. (We can discuss the use of racial stereotypes in advertising another day.) The ad was for an extremely low price (about $10) waterproof case. It touted how wonderful it would be to take photos under water using your iPad or iPod. The vendor was selling the cases through an internet “deal” service.

Now stop and think about this whole scenario for a minute.

Do you have an iPad? Retina? 128 GB? Wi-Fi-enabled?

Or a similar Cadillac iPod?

Was it cheap? Is it easily replaceable? Do you consider it disposable?

Why on EARTH would anyone risk their high priced tech toy in a bargain basement case *underwater*?!

Can you spell disaster?

And imagine trying to get the money for a replacement device from a one-time bargain-sale internet shop. Those are the modern-day-equivalents of those mysterious thrift shops that disappear just after selling you the cursed DVD player that projects The Shining on the walls of every room of your house at night, every night, even when it’s unplugged and locked in a trunk in the garage.

Protect Yourself: Pay More When It’s Appropriate

There are times when you should pay more:

  • Buy airline tickets from a company that doesn’t have to economize on its airplane maintenance work.
  • Buy waterproof cases for expensive electronics from bricks-and-mortar stores and buy cases that offer some kind of warranty against damage to your device.
  • Pay a bit more to get a licensed trained mechanic to fix your brakes.

Think about what you would lose if your purchase doesn’t work before you economize.

Related Reading

Join In
Have you seen other examples of disasters-in-waiting? Please share your experiences with a comment.