01 Oct How To Save Time And Money On Your Mortgage
If you need to renew your mortgage or are purchasing a home for the first time, you’ll need to think long and hard about your options. One way of making the selection process easier and less stressful, is to work with a broker, who will know everything there is to know about the following time and money saving tips:
Pre-payment privileges, what are they and how are they helpful
Giving you the flexibility to prepay a certain percentage of your mortgage before the amortization period without incurring a penalty, pre-payment privileges can help you pay off your mortgage quicker. Talk to your lender about their pre-payment privileges and see what they are able to offer you.
It’s possible to save thousands of dollars on your mortgage and pay it off much quicker with such privileges; your broker will be able to explain this to you in greater detail.
Mortgage penalties; find out what they are before you buy:
If any changes to your circumstances might cause you to have to sell your home before the end of the mortgage term, penalties will doubtless apply. Be sure to check these with your lender, or if you’re working with a broker, they will do this for you. For example, in Canada, variable mortgages with the big 5 usually make you pay 3 months of interest to break your mortgage, while with fixed rate mortgages, you’ll usually pay an IRD, interest rate differential. What you could have to pay for breaking your mortgage is an important factor to consider for many homeowners, and finding the best deal should you have to sell your home earlier than anticipated, could end up saving you a lot of money.
If you want to avoid paying mortgage penalties altogether, you could opt for a portable mortgage, or an assumable mortgage. Talk to a mortgage professional and they will explain these to you in further detail.
Could you benefit from a down payment of less than 20%?
You might be surprised to learn that making a down payment of 20%, does not guarantee that you get the best interest rate. Lenders actually offer their best rates of interest to what are known as ‘high-ratio’ borrowers, those individuals who need mortgage insurance because they have less than 20% to put down on a mortgage. This is because default insurance makes such borrowers a lower risk when it comes to loss, and subsequently makes it cheaper for lenders to fund their loan and pass some of the savings back to them in the form of lower rates.
It’s always possible to get the best deal on a mortgage for your circumstances provided you conduct thorough research and have a good understanding of the terms, conditions and small print involved. But if you want to guarantee that you get the very best deal, it really does pay to work with a mortgage broker who will give you unbiased advice, guidance and
tips.