To Help You Become Mortgage-Free Faster

Monthly, bi-weekly, or weekly payments?
 
Once you have the mortgage amount, rate and amortization period, your monthly payment can be calculated.  Now is the time to decide how often you want to make your payments, because by selecting the right payment frequency could literally mean thousands of dollars in savings.  For example, on a $100,000 mortgage at 8% interest, amortized over 25 years, the monthly payments would be $763.21. However, by simply switching to accelerated bi-weekly payments (every two weeks) with payments of $381.61 (half of the monthly payment), there would be a saving of $30,484 in interest! Weekly payments of $190.80 will save $30,839 in interest, and you will be mortgage free in the 19'th year.

You notice that there is very little difference between weekly and bi-weekly payments, however. If you have other payments throughout the month, bi-weekly may be less stressful and easier to budget. If you are self-employed or commissioned, and your income varies greatly from week to week, it may be easier to pay monthly and use your prepayment privileges to knock the amortization period. Also, not all weekly and bi-weekly payments work the same as above. Let us show you how to manage your mortgage to your best advantage.

Prepayments - Extra Payments against Principal

This is one of the most important features to look for when you are getting a mortgage. Having the prepayment privilege that works to your specific needs could mean a difference of thousands of dollars over the life of your mortgage. Although all financial institutions offer some form of prepayment privilege, the amount and how it can be applied varies from one to another. Some offer only up to 10%, once per year, and on the anniversary date. Then there are others that offer as high as 25% per year, and prepayments can be done throughout the whole year as long as the total does not exceed 25%. Ideally, you should work your prepayment privilege as often as possible throughout the year. Saving aside to make that big prepayment is not the best strategy. We have found that the small, regular prepayments will get you quicker to that mortgage burning party (I hope we're invited).

(TIP: Put your tax refund to good use.   Make sure that you contribute as much as possible to your RRSP account and use the tax refund to pay down your mortgage - you win both ways - you have the retirement savings AND the refund savings on mortgage interest.)

Often times most mortgage shoppers are only looking at rates and overlooking this interest saving feature. That is why it is important to allow me make some recommendations for your specific needs. Not only can I find you the lowest rates, I can also get you the features that will work to your advantage.

Increase Your Regular Payment
 
The secret to borrowing is borrow early in your life. The reason is that the future value of the dollar decreases. Why I bring up this fact is that when you borrow early, your payments are set. As time goes, your incomes increase (hopefully), but your mortgage payments stay the same, provided you locked-in to a long term, fixed mortgage. Therefore, in the future you may be in a position to increase your payment on the mortgage, regardless if you are paying weekly, bi-weekly, or monthly. Any increase in payment is directly going to pay down the mortgage, thus saving you thousands down the road due to the effect of interest not compounding on that amount for the life of the mortgage. Neat little feature.

Again, this feature varies from bank to bank. Some allow increasing payment up to 10%, and others as high as 25% per year, some up to 15% only once in the term of the mortgage. If you increased your payments, should the need arise, you can go back to the original payments as well.

Double-Up on Payments

A few lenders will allow you to double-up on your payments, and the extra payment goes directly in the principal. If you double-up once in the year, you have just achieved the benefits of the weekly or bi-weekly mortgage. This is a neat little feature for someone who prefers the monthly payments but wants the results of the weekly and bi-weekly payments. And some lenders allow you the flexibility to skip a payment if you have made a double payment previously. This defeats the purpose, but when times are tough, a neat little feature to have.

Early Renewal Option

This is a great feature to have when interest rates are on a rise. If you are locked-in to a term and the mortgage will be maturing in months or years down the road, and the mortgage rates are on a rise, you can renew your mortgage before the maturity and lock-in the low rates for a new term. You may not even have to pay anything out of pocket and still save over the term, especially if rates move up considerably.  Make sure you give me a call so I can negotiate this for you - but likely I will have contacted you by then.

Portable Mortgage

If you want to take your mortgage with you when you move, you can if your mortgage has a clause that allows you to do that. This option allows you to continue your savings on your lower rate if the going rates are higher, as well as avoid any penalties if you were to break that mortgage. If you need a larger mortgage for the new property, your existing mortgage amount can be increased.  If you do increase the amount you may have to pay a new 'blended' rate which is an average between your existing low rate and the higher current rate.  You are still ahead in terms of the interest rate.  As for the associated costs, since a new mortgage document must be registered on title, legal fees and normal appraisal fees would be applicable.

Assumable Mortgage

If you are moving and don't want to take your mortgage with you, or you are selling and not buying, an assumable feature will allow the buyer(s) of your property to take over the mortgage, providing they meet the lender's qualifying criteria. By doing so, you will not pay any penalties as you are not breaking the mortgage contract. In fact, if your interest rate is lower than those available at the time, your assumable mortgage suddenly became a great selling feature for your property.

A word of caution here: Just because someone assumes your mortgage does not necessarily mean you are off the hook for the responsibility. You must get a release from the Mortgage Company to ensure that you are no longer liable for it. Some mortgage companies automatically offer a release, but with others, you must make the request, and do it through your lawyer.

Mortgage Life Insurance (optional)

Since your home is likely your single largest investment, you may want to protect that investment. Many financial institutions offer mortgage life insurance at an affordable and competitive price, and the requirements for eligibility are usually quite simple to meet. If you or your co-borrower (if you choose joint coverage) die, the insurance company will pay off your mortgage. Also, some institutions now offer job-loss and/or disability insurance to borrowers. The best thing to do in making a decision about how to insure your mortgage is to have an insurance agent work out the figures for a private term insurance and mortgage life insurance.

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