A Home Equity Line of Credit may be the best scenario for you and could unleash tens of thousands of dollars and redirect it back to your own pocket and slash your mortgage balance. Imagine having your savings and income deposits work directly to reduce your mortgage!!! For the right person or couple, this particular mortgage product will change the way you view banking, mortgages, savings, and investments. If you understand and have a good grasp of your household budget, then you need to learn more about a method of banking that will bring you years closer to mortgage freedom! This type of mortgage is not for everyone, but everyone should have access to this knowledge. Call to find out more.
Bi-weekly and weekly payments
Most mortgages have the option to allow payments to be made on a weekly or bi-weekly basis. This option may be desirable for two reasons. The first is it can save you money as you can expect to pay off your mortgage in about 21 years, rather than a typical 25 year loan. This can save you thousands in interest payments over the life of your mortgage. The other reason why these options are so popular is that if your employer pays you on a weekly or bi-weekly basis, you can simplify your budgeting by making the mortgage payment line up with your pay date.
Making Extra payments
Paying extra amounts on your mortgage in one more way you can make a big interest saving over time. When we select a mortgage company, pre-payment privilege options are something that we look for. Having the option to paydown up to 20% of the original balance of your mortgage each year is a very desireable feature. It is important that this extra payment option also be flexible enough to allow you to pay smaller payments on the mortgage and as often as you wish. An extra $1000 periodically paid on a mortgage can help you become mortgage free just that much quicker.
Reducing the CMHC fees on your purchase
When you require a mortgage for more than 80% of the purchase price of a property, that mortgage must be insured by Canada Mortgage and Housing (CMHC) or GE Mortgage insurance. The premium charged by these company`s decreases as the down payment increases. When you finance your property at 95%, a premium of 3.75% is added to the mortgage. By increasing the down payment to 10% of the purchase price the premium can be reduced to 2.5%. If you can put down 20%, you can avoid any additional insurance fee. Depending on your situation there are ways that you can structure this financing to drastically cut the CMHC or GE insurance premium.
Advantages of Bigger Down Payments
As mentioned above, when you put a 20% down payment on your purchase you will avoid the CMHC premium in the typical residential purchase. More importantly the larger the down payment, the lower the amount of interest you will pay over the life of your mortgage.
Short Term Rates vs. Long Term Rates
The options for mortgages available can be very confusing for most mortgage shoppers. Terms for mortgages vary between variable and fixed rate, 6-month terms to 10 year terms. Taking a variable or floating rate mortgage can offer you significant interest savings. Typically the shorter the term or guarantee of the rate, the lower the rate will be. This does not always happen, depending on the market place and the economy, but history has shown that short-term rates tend to be lower than long-term rates. The up side of variable rate mortgages is the strong potential for interest rate savings. The down side is the fact that you are accepting the interest rate risk without a guarantee. If you are considering a variable rate mortgage you need to look at your own risk tolerance, and your cash flow available to deal with potential increased payment. Considering projections of rates and where we see interest rates heading can also be important in this decision. Make sure you talk to an expert when you are making this decision.