Shop around! Bank employees are paid to protect the bank, and getting the right mortgage from them usually involves playing games. Why waste your time? Getting a good interest rate is crucial, but don’t forget, flexibility and options are also important. Talk to a mortgage professional who can give you impartial advice and is not tied to any one specific lender.
Whether applying for a credit card, personal loan, or a mortgage all creditors will want to review your credit history. The best thing you can do is to avoid consumer debt as much as possible, always pay your bills on time, and the less you inquire for credit the better. Visit www.equifax.ca to get a free copy of your credit report no strings attached. Your credit history can affect more aspects of your life than you think.
By matching the frequency of your mortgage payments with the frequency of your pay periods, not only is it easier to budget and monitor your cash flow, you’ll shave years off your amortization. Bi-weekly payments, for example, means you’ll make 26 payments in a year, equal to 13 monthly payments instead of 12. It’s this “accelerated” pace of repayment that allows you to repay your principal quicker, saving you money in interest.
For some homebuyers with budgeting room, see what your payments would be with a 20-year amortization instead of 25 years. In return for slightly higher payments, you could shave 5 years off your amortization, build equity in your home quicker, and be well on the road to being mortgage-free sooner. For existing homeowners who are now renewing mortgages at much lower interest rates, instead of taking the lower payment, keep the payments the same or make them higher, and shorten your amortization.
Many borrowers consider pre-payment privileges an important feature when taking out a mortgage, yet only 3% of consumers actually take advantage of them. The extra payments go directly in your pocket, either by paying less interest, building equity more quickly, or being mortgage-free sooner. Every dollar you pay over and above your regular mortgage payment goes directly to principal. That means that whenever possible, a few hundred dollars here and there can quickly add up to a few thousand saved later on.
While it varies with each lender, most financial institutions will allow a lump sum prepayment up to a maximum of 20% of the original mortgage amount in any one calendar year. This privilege is usually not cumulative so if you don’t use it, you lose it – you can’t carry them forward. Most people make the mistake of thinking all or nothing. If they can’t come up with a substantial prepayment they don’t bother at all. Even small extra payments could pay big dividends later on. Income tax refunds (or any portion of) are tailor-made for extra payments of principal on a mortgage.
