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Urban “Off the Grid”: An Introduction

Diane Buchanan • Jun 02, 2016

You’re on “the grid”

Every few weeks, we open our mailboxes (or our email inboxes) with bated breath. Inevitably, we find another heap of utility bills, waiting to separate us from our hard earned dollars. This is not unusual; this is simply part of life for most Canadians. But, what if it didn’t have to sting so much? What if this cycle didn’t have to replay itself, in it’s ugly fullness, month after month? What if we could cut down on our bills while being kind to mother nature?

For a small (but growing) number of hard working Canadians, living utility bill free has become a reality. How, you ask? These folks have left the power grid behind. And no… no one is suggesting you move to a place like this (unless of course that is what you want to do). 

Now, let’s be frank, here: many of these “off the grid’ers” live in rural areas, often times to the point of total and complete seclusion. But the fact remains, most of us live in urban areas. We’re involved in our communities; we have families and responsibilities. So, while it may not be possible for the majority of us to live entirely off the grid, it’s certainly worthwhile to ask the question of, “How can we use the self-sustaining technology that’s been developed to lessen our footprint and gain a measure of independence for ourselves?”

This series will focus on just that; we’ll answer the question of, “What does it look like to be an urbanite ‘off the grid’ adherent?”But, before we get too deep into this, let’s get some basics out of the way:

WHAT is “the grid”?

You’ll hear the term “the grid” often within this series; but don’t be afraid. Each time, we’ll be referring to the power grid, or the power distribution grid. Essentially, it’s the way that power travels from it’s source to your home.

Most of us use this power every day, for various tasks such as: connecting our devices and appliances to power outlets, cooling our homes in the spring and summer, heating our homes in the fall and winter, cooking our food, refrigerating much of our food, etc. And sadly, we, as a society, have become largely dependent on this technology; so much that, in the event of a power outage many neighbourhoods become completely crippled. The city of Toronto suffered a major ice storm in late December of 2013, and countless folks had to leave their homes because they weren’t set up to live, even a few days, without grid powered electricity.

WHY going “off the grid” is gaining traction…

Why is going off the grid gaining traction with an increasing number of people? There seems to be three main reasons. Firstly, producing your own power takes away the need to buy it from others, thus saving you money. It’s just that simple. Secondly, for many individuals, concern for the earth and the desire to cut down on their environmental footprint takes precedence. And thirdly, many people simply don’t like the idea of remaining reliant on others for the necessities of life.

This is larger than fear mongering, and it’s wider than the few individuals who live in the hills outside of town. As the population grows, and as the threat of natural and man-made disasters creep closer to home, many individuals are asking, “What would I do in the event that [fill in the blank] happens?”. And this question often leads to a deepening interest in all things self-sufficiency.

WHO can do it?

If you resonate with any or all of the previous rationales behind going “off the grid”, you might be a candidate to take the next step.

Which leads us into our final “W” of this post:

WHERE: Off the grid living in an urban setting…

While “off the grid” style living has been popularized by people who generally occupy the nooks and crannies of this world, an increasing number of city and suburban folk are taking up the challenge. The Ingredients needed are straightforward: willing individuals, a base of knowledge (because remember, knowledge is power!), and some help to get it all started.

Urban “off the grid” living is honourable and  achievable (at least to a certain degree). It just takes a little creativity and a willingness to look at life from a slightly different angle. 

DIANE BUCHANAN
 Mortgage Broker

LET'S TALK

Lowering Your Overall Cost of Borrowing

By Diane Buchanan • 01 May, 2024
If you’re like most Canadians, chances are you don’t have enough money in the bank to buy a property outright. So, you need a mortgage. When you’re ready, it would be a pleasure to help you assess and secure the best mortgage available. But until then, here’s some information on what to consider when selecting the best mortgage to lower your overall cost of borrowing. When getting a mortgage, the property you own is held as collateral and interest is charged on the money you’ve borrowed. Your mortgage will be paid back over a defined period of time, usually 25 years; this is called amortization. Your amortization is then broken into terms that outline the interest cost varying in length from 6 months to 10 years. From there, each mortgage will have a list of features that outline the terms of the mortgage. When assessing the suitability of a mortgage, your number one goal should be to keep your cost of borrowing as low as possible. And contrary to conventional wisdom, this doesn’t always mean choosing the mortgage with the lowest rate. It means thinking through your financial and life situation and choosing the mortgage that best suits your needs. Choosing a mortgage with a low rate is a part of lowering your borrowing costs, but it’s certainly not the only factor. There are many other factors to consider; here are a few of them: How long do you anticipate living in the property? This will help you decide on an appropriate term. Do you plan on moving for work, or do you need the flexibility to move in the future? This could help you decide if portability is important to you. What does the prepayment penalty look like if you have to break your term? This is probably the biggest factor in lowering your overall cost of borrowing. How is the lender’s interest rate differential calculated, what figures do they use? This is very tough to figure out on your own. Get help. What are the prepayment privileges? If you’d like to pay down your mortgage faster. How is the mortgage registered on the title? This could impact your ability to switch to another lender upon renewal without incurring new legal costs, or it could mean increased flexibility down the line. Should you consider a fixed rate, variable rate, HELOC, or a reverse mortgage? There are many different types of mortgages; each has its own pros and cons. What is the size of your downpayment? Coming up with more money down might lower (or eliminate) mortgage insurance premiums, saving you thousands of dollars. So again, while the interest rate is important, it’s certainly not the only consideration when assessing the suitability of a mortgage. Obviously, the conversation is so much more than just the lowest rate. The best advice is to work with an independent mortgage professional who has your best interest in mind and knows exactly how to keep your cost of borrowing as low as possible. You will often find that mortgages with the rock bottom, lowest rates, can have potential hidden costs built in to the mortgage terms that will cost you a lot of money down the road. Sure, a rate that is 0.10% lower could save you a few dollars a month in payments, but if the mortgage is restrictive, breaking the mortgage halfway through the term could cost you thousands or tens of thousands of dollars. Which obviously negates any interest saved in going with a lower rate. It would be a pleasure to walk you through the fine print of mortgage financing to ensure you can secure the best mortgage with the lowest overall cost of borrowing, given your financial and life situation. Please connect anytime!

Fixed-Rate or Variable-Rate Mortgage?

By Diane Buchanan • 24 Apr, 2024
If you're looking to buy a new property, refinance, or renew an existing mortgage, chances are, you're considering either a fixed or variable rate mortgage. Figuring out which one is the best is entirely up to you! So here's some information to help you along the way. Firstly, let's talk about the fixed-rate mortgage as this is most common and most heavily endorsed by the banks. With a fixed-rate mortgage, your interest rate is "fixed" for a certain term, anywhere from 6 months to 10 years, with the typical term being five years. If market rates fluctuate anytime after you sign on the dotted line, your mortgage rate won't change. You're a rock; your rate is set in stone. Typically a fixed-rate mortgage has a higher rate than a variable. Alternatively, a variable rate is not set in stone; instead, it fluctuates with the market. The variable rate is a component (either plus or minus) to the prime rate. So if the prime rate (set by the government and banks) is 2.45% and the current variable rate is Prime minus .45%, your effective rate would be 2%. If three months after you sign your mortgage documents, the prime rate goes up by .25%, your rate would then move to 2.25%. Typically, variable rates come with a five-year term, although some lenders allow you to go with a shorter term. At first glance, the fixed-rate mortgage seems to be the safe bet, while the variable-rate mortgage appears to be the wild card. However, this might not be the case. Here's the problem, what this doesn't account for is the fact that a fixed-rate mortgage and a variable-rate mortgage have two very different ways of calculating the penalty should you need to break your mortgage. If you decide to break your variable rate mortgage, regardless of how much you have left on your term, you will end up owing three months interest, which works out to roughly two to two and a half payments. Easy to calculate and not that bad. With a fixed-rate mortgage, you will pay the greater of either three months interest or what is called an interest rate differential (IRD) penalty. As every lender calculates their IRD penalty differently, and that calculation is based on market fluctuations, the contract rate at the time you signed your mortgage, the discount they provided you at that time, and the remaining time left on your term, there is no way to guess what that penalty will be. However, with that said, if you end up paying an IRD, it won't be pleasant. If you've ever heard horror stories of banks charging outrageous penalties to break a mortgage, this is an interest rate differential. It's not uncommon to see penalties of 10x the amount for a fixed-rate mortgage compared to a variable-rate mortgage or up to 4.5% of the outstanding mortgage balance. So here's a simple comparison. A fixed-rate mortgage has a higher initial payment than a variable-rate mortgage but remains stable throughout your term. The penalty for breaking a fixed-rate mortgage is unpredictable and can be upwards of 4.5% of the outstanding mortgage balance. A variable-rate mortgage has a lower initial payment than a fixed-rate mortgage but fluctuates with prime throughout your term. The penalty for breaking a variable-rate mortgage is predictable at 3 months interest which equals roughly two and a half payments. The goal of any mortgage should be to pay the least amount of money back to the lender. This is called lowering your overall cost of borrowing. While a fixed-rate mortgage provides you with a more stable payment, the variable rate does a better job of accommodating when "life happens." If you’ve got questions, connect anytime. It would be a pleasure to work through the options together.
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