Monday, April 16, 2018

Tips to save you interest on your mortgage!!!!!

1. Shop around and not just for the lowest rate
Of course, you should get the lowest interest rate that you can. But rates aren’t the only thing to consider when comparing options. With your mortgage the lowest rate does not equal the best mortgage.
Your mortgage should have:
  • Prepayment privileges: As interest rates rise, a bigger chunk of your mortgage payments will go toward interest rather than the principal. That’s why it’s important to get a mortgage that will allow you to make large lump-sum contributions and increase your monthly payments if you decide to pay down your debt faster. Mono line lenders might both lower rates and offer more generous prepayment privileges than the big banks. “Mono Line lenders with a solid track record are worth considering, especially if it means paying down your mortgage sooner,” Mono line lenders have lower overhead costs because they are online and can pass that savings onto you!  

  • Penalties: What would happen if you were to break your mortgage? That’s a question every mortgage applicant should ask. People wind up having to break their mortgage for any number of reasons: They move, they get divorced, they lose their jobs. And that can cost them thousands of dollars in mortgage penalties, which is why it’s important to look at the fine print. In Canada, if you have a variable-rate mortgage, the penalty is generally three months’ interest. If you have a fixed rate, however, you could get dinged for much more than you think. That’s because you’ll have to pay the greater of either three months’ interest or something called the interest rate differential (IRD), which is based on current mortgage rates and your remaining mortgage balance. If you’re going for a fixed-rate mortgage, it’s important to ask your lender whether the IRD is calculated based on their discounted rate or their considerably higher posted rate. “The big banks calculate fixed-rate penalties using their posted rates,”  Mono-line lenders calculate their  penalty using their discounted rate, please see one example from my mono-line lender First National Bank.
  • This is an exceptional example from Frist National on penalty savings

  • Portability: Speaking of mortgage penalties, one way to avoid them, have a portable mortgage,(If you move the mortgage moves with you). This means you can transfer your mortgage to your new home and combine it with a new loan, if necessary. Another great feature that could save you thousands of dollars in penalties is having an assumable mortgage. That would allow you to leave your mortgage behind for another qualified buyer instead of breaking it.
Stay tuned for more tips to come this week!

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