Interest rates are at a historic low. Is this the time to re-negotiate your mortgage? The answer is a resounding, “maybe“.

The basic rule of thumb is if you are paying more than 5% interest then you should definitely check in to it.  With a five-year fixed rate currently hovering around 3.99% the savings can be substantial, both in terms of monthly payments and the total interest paid out over the life of the mortgage.

The party spoiler comes in the form of a penalty mortgage companies charge you to break your contract. It is called the interest rate differential, or IRD.  In years past the homeowner would simply pay three months interest to get out of their mortgage. Unfortunately those days are gone.

Today, most lenders charge a penalty based on the number of months left on the mortgage, the outstanding balance; the difference between current and past interest rates, and other factors. These calculations are complicated and differ between lenders so you have to obtain the penalty figure directly from your current mortgage holder. But don’t be surprised if your penalty in somewhere in the $15,000-$20,000 range.

Once you know the penalty you can make inquiries with competing lenders. Alternately, you can try to re-negotiate with your current mortgage holder. As surprising as it might seem, lenders are lending and many are competing aggressively to win good quality mortgage business.  Don’t be afraid to shop around – some lenders will pay you to switch from your current lender by covering legal, appraisal and discharge fees and by providing creative ways of covering the payout penalty.

So who is re-mortgaging these days?  Some are homeowners who want to reduce their monthly payments and their interest rates.  Others are looking to renovate. (There is reportedly a recent 69% increase in home renovations fueled in part by tax incentives).  And the brave ones are looking to free up some equity in their existing home to pick up condos at reduced prices for investment purposes.

Keep in mind that lending criteria might have changed since you last took out your mortgage and you might need to re-qualify. This might be a problem if your employment circumstances have changed.  Also remember, that you will probably need a new appraisal of your house – another potential deal breaker if it has lost value in recent months.

There are no hard and fast rules when it comes to re-mortgaging. Lenders emphasize that that they look at every situation on a case-to-case basis. There are deals to be had – check out the numbers to see if they work for you. – Karin Mizgala

Karin Mizgala is a Vancouver-based fee-for-service financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.

As if we don’t have enough to worry about with the recent economic slump, there are now growing concerns about the fate of corporate pensions.  A number of Canada’s largest companies are calling for the easing of funding rules on their pension plans claiming that current pension plans are placing unrealistic burdens on their operations at a time when cash flow is tight.  Not surprisingly, various labour groups and retirees are crying foul. The ensuing battle could have long-term repercussions for many pensioners. So what to do?

The type of pension plan that is causing the controversy is called a “defined-benefit” pension, affecting about 20% of corporate pensions. Under this type of pension, the retiree gets a fixed amount of income every month depending on their years of service and salary levels throughout their employment.  Air Canada, Canadian Pacific Railway and Bell Canada are amongst the corporations saying this type of “guaranteed” pension is unsustainable.  While the current economic downturn is making the pension funding situation worse, the reality is that many pension plans were under serious pressure long before now.

Companies, unions, governments, and CARP, the lobby group representing retired Canadians are all weighing in on the debate. Some are suggesting rule changes, others are fighting to retain the status quo, while still others are championing alternate pension models. While the battles rage, it is imperative that retirees and employees alike check their plans and follow the debates closely. Check on such important details as: inflation indexing; medical benefits at retirement; changes to employee contribution amounts; and changes to pension payouts. You should also check on the current financial health and long-term viability of your particular pension plan. After all, it is your money and your retirement that is at stake! – Karin Mizgala

Karin Mizgala is a Vancouver-based fee-for-service financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.

As a financial educator I was pleased to see that the recent budget introduced a plan to raise the level of financial literacy among consumers.  The plan is to spend $5 million on a task force made up of representatives from the business, education, volunteer and academic communities to make recommendations to the finance minister on a “cohesive national strategy on financial literacy”.

But is this really necessary?  Judging by the number of personal finance books I saw at Chapters last week and the amount of information that is available online and on TV, it’s hard to believe that we all aren’t financial gurus and that I still have a job as a financial planner.

Turns out I have my work cut out for me for a while yet.  A few weeks ago, I ran a financial planning workshop for a group of 40 professional women and I asked for a show of hands on who really understood what they were invested in.  Only three people fessed up to financial geekdom, which meant that over 90% of the women in the room had little or no knowledge of how their money was invested.

A study was done a few years ago by a US insurance firm that came up with the same statistic  — 90% of women lacked confidence in their ability to make good financial decisions.  While the numbers aren’t quite as grim for men, they aren’t much better.

If anyone from the task force asks for my input (and I’d be glad to take their call), I will say that financial literacy doesn’t happen overnight, and writing more books or putting up more websites won’t cut it, especially if the information is provided by companies that are using education to sell financial products.

Financial literacy is a skill that takes time to develop and it needs to be taught in schools, at home and through independent third parties.  It will take programs that help people discern what information is relevant to them, what questions they need to ask financial service providers and how to integrate this information into meaningful life choices.

Otherwise it’s just another $5 million investment gone bad. — Karin Mizgala

Karin Mizgala is a Vancouver-based fee-for-service financial planner with an MBA and a degree in psychology. She’s the co-founder of the Women’s Financial Learning Centre.

I was on vacation in Hawaii last week and when meeting new people, the usual question came up, “So what do you do?” As soon as I said, “I’m a financial planner”, the inevitable followed, “What do you think about such and such a stock?”  This reminded me how closely tied financial planning is to investment selection in most people’s minds.  While millions of dollars are spent and made on selling and marketing investment products like mutual funds, most of these activities aren’t the least bit helpful to the average Canadian who is slipping behind financially and stressed about money.

Here’s a basic financial check-in that you only have to do once a year, and I guarantee that knowing what you want and getting a handle on where you stand with your money will pay better dividends than any hot stock tip:

1. Set authentic, realistic goals – Figure out what you want to achieve personally and financially in the coming year and commit to the goals in writing.

2. Check in on your net worth – Pull out your recent property assessment, your year-end bank account, investment, mortgage and loan statements and make two columns.  Write down and add up what you own (assets) in one column and what you owe (debts) in the other.  The difference between the two is your net worth and your financial starting point for the year.

3. Create a spending and savings plan – Tally up what you expect to earn after tax and deductions (your cash inflows) and what you expect to save and spend next year (cash outflows).  If your cash outflows exceed your inflows, then do whatever you can to change your spending plans – and ignore all the hype about investments, no matter how enticing the pitch sounds until you have a strong financial foundation in place.

Check out Women’s Financial Learning Centre for worksheets to help you with your annual financial check-in.

Karin Mizgala is a Vancouver-based fee-for-service financial planner with an MBA and a degree in psychology. She’s the co-founder of the Women’s Financial Learning Centre.

At an investing workshop a few weeks ago, I asked the group of about 40 professional women how many of them fully understood what they were invested in.  Shockingly, only 3 people raised their hand which meant that over 90% of the women in the room had little or no knowlege of how their money was invested.  I was reminded once again of how intimidating the investment world is for most women and this reality is the inspiration for an investor education series that I will be running over the next few months in this column.  Each month I will explain and demystify the most common investments that you will likely encounter so you will develop a greater understanding of terms like mutual funds, stocks, bonds, index funds and GICs.

For those of you who have completed the Build Your Own Financial Plan program or one of basic investing courses, you can use the column as a refresher and, if you would like to deepen your understanding of investments, check out the MoneyMastery program that I will be starting in mid February.

If you are in the majority of women who don’t understand what they’re invested in, make 2009 the year that you change your relationship with money.  Pick up the phone right now and book a meeting with your bank or advisor.  Bring your latest investment statement to the meeting and ask them to explain, in layman’s terms, what you’re invested in.  Don’t worry about bothering them, remember this is your money and you have a right to know where your money is going.

Changing your relationship to money won’t happen overnight and does require a commitment to being open to learning an unfamiliar language and acquiring new skills.  You don’t have to become an expert, but if you’re not on top of your money, who is?

To learn more about what’s happening in the markets now and what to do with your investments, check out our upcoming teleclass with investment expert Tracy Theemes.

Karin Mizgala is a Vancouver-based fee-for-service financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.

It’s that time of year where most of us take stock and think about what we want in life.  And, more often than not, money seems to be the killjoy that throws cold water on our hopes, dreams and desires. “If I only had more money, I could….” While it might seem like financial success is about how much money we have, I’m convinced that it’s really about how well we align our money with our intentions, goals and values.

Here’s a basic financial check-in that you only have to do once a year, and I guarantee that knowing what you want and getting a handle on where you stand with your money will pay better dividends than any hot stock tip:

1. Set authentic, realistic goals – Figure out what you want to achieve personally and financially in the coming year and commit to the goals in writing.

2. Check in on your net worth – Pull out your recent property assessment, your year-end bank account, investment, mortgage and loan statements and make two columns.  Write down and add up what you own (assets) in one column and what you owe (debts) in the other.  The difference between the two is your net worth and your financial starting point for the year.

3. Create a spending and savings plan – Tally up what you expect to earn after tax and deductions (your cash inflows) and what you expect to save and spend next year (cash outflows).  If your expenses (cash outflows) exceed your income (cash inflows), then do whatever you can to change your spending plans – and ignore all the hype about investments, no matter how enticing the pitch sounds until you have a strong financial foundation in place.

Check out our WFLC worksheets to help you with your annual financial check-in. Or better yet, register for one of our upcoming courses Build Your Own Financial Plan or Sheila’s Debt-Free Challenge and make 2009 the year you finally take financial control.

Sheila Walkington is the co-founder of the Women’s Financial Learning Centre.