| Making the most of your mortgage
Buying a home is the biggest investment you'll likely ever
make. Whether you're a first-time buyer or refinancing your
home, saving money on mortgage payments means you'll be financially
ahead. Follow these tips to help reduce your mortgage costs.
You better shop around
To get the best rate, shop around. Lenders frequently discount
the posted rate, from as low as a quarter of a percentage
point to as high as a full percentage. Even a small difference
in the rate will save you in your monthly payments. Compare
rates by contacting several financial institutions. The Internet
can be a great search tool for finding up-to-date information
on rates and terms quickly.
The shorter, the better
Shorten the loan repayment period or amortization period
and you'll pay your mortgage off quicker. You will pay higher
monthly payments, but you'll make big gains in building up
your equity. This means you'll pay less in total interest
over the life of the mortgage.
The choice is yours
A prepayment option lets you pay part of your mortgage principal
before it's due, reducing the amortization period. Restrictions
usually apply and can include a prepayment penalty. As well,
prepayment is often limited to specific amounts and times.
The more, the less
Frequent payments will save you money on your mortgage.
Bi-weekly payments mean you'll make 26 payments in a year,
equal to 13 months of payments instead of 12. If you pay
your mortgage weekly, instead of monthly, an amortization
of 25 years will be reduced to about 18 years.
The more, the merrier
A larger down payment will reduce your mortgage insurance
cost. For example, mortgage insurance ranges from 0.5 to
3.75 per cent of your mortgage amount depending on the down
payment. If your down payment is 25 per cent or more of the
purchase price, mortgage insurance is not required.
Variety is the spice
A variable rate is a mortgage with an interest rate and
payments that can change over the term of the loan based
on the current interest rate.
Know your options when you choose a mortgage and get one
that best suits you. Your realtor can recommend a mortgage
consultant or financial institution. |
