“Why would getting a smaller mortgage be a bad thing?”

As tax season wraps up many of my clients are now shifting their attention to re-negotiating with their banks for a smaller mortgage rate and are often shocked when I show them the hidden costs of a smaller mortgage. 

Just to be clear, lowering it is a good thing. 

But what I wanted to share with you today is not the benefits of a lower rate (which is obvious) but the overlooked costs that aren’t as obvious. 

You see the hidden cost is not “cash out of hand” i.e. like you’re going to paying more, it’s actually “cash not utilized” 

What’s the difference? 

Well cash out of hand just means something is costing you more. If you have to pay a higher mortgage rate then that’s more cash out of your hands. 

And obviously negotiating a lower rate to have more cash in hand is a great thing! 

But cash not utilized?

That’s missing the opportunity to GET MORE cash when going in to renegotiate your mortgage. 

Remember when COVID started and gas prices dropped to all time lows? 

On the one hand it was surprising to see every time you did fill up, but on the other it felt like a missed opportunity because no one was really driving anywhere. 

But now imagine if you had a farm with equipment that uses a lot of gas and a big tank on the property used for storing gas. 

If you didn’t fill up that big tank with cheaper gas to use later you would literally be wasting the opportunity in front of you. 

You weren’t hit with a new expense that caused you to have “cash out of hand” but by not acting on the opportunity in front of you you’re wasting the “cash not utilized” in the cheaper gas prices. 

That’s exactly what’s going on with people not acting on historically low interest rates to get their hands on “cash not utilized”.

In the past month I’ve helped 2 clients realize AND use the leverage they do have with their mortgage renewal to make use of the “cash not utilized” principle and secure the capital for an additional investment property. 

You probably have way more leverage than you realize so let’s jump on a quick call and see where that may be?