There's a major sense of accomplishment and peace of mind of owning your home outright. Paying off your mortgage sooner can make sound financial sense by saving you thousands of dollars in interest costs. Learning how to save on your mortgage can slice years off your loan. Finding out if you can save on your mortgage payments won't cost you anything, and you will discover whether you have the best loan available for your individual circumstances. 1. Shop around for the best mortgage possible with your credit score. 2. Select weekly or bi-weekly mortgage payments. If you make bi-weekly payments of $415 instead of monthly payments of $830, you could save almost $27,000 in interest over the entire amortization period of your mortgage, and you could own your home about 4-1/2 years sooner. 3. Prepay a little extra every month, or any time during the term of your mortgage. Increasing your payment by even a few dollars each month will pay down your principal amount faster. It is a good idea to pay 10-15% more each month. This amount shouldn’t put too much extra burden on you, and it will help to pay off your mortgage much faster. For example, if you increased your mortgage payments by just $170 from $830 to $1,000, you could save almost $48,000 in interest over the entire amortization period of your mortgage, and you could own your home about 8 years sooner. 4. Make an annual lump sum payment. 6. Red flag your extra payments. 7. Stay informed. When Should You Hold Off on Paying Your Mortgage Faster? Secondly, if you are planning on moving soon, you may want to hold off investing money into your existing home as you may need the money for a down payment, closing costs or buying new furniture for your new home. As you can see, with a little research, you could save on your mortgage. The truth is: the banks won’t tell you how to save money on your mortgage as they want to make the interest on the money that they have loaned to you. If they were to help you save money, they would lose money and their profits would stagnate. Make sure that if you implement changes to save on your mortgage it is the right decision for you.
______________________________________________________________ There is more to a mortgage, than just a low rate! Make sure all the features fit your needs While some mortgage rates have been increasing in recent weeks, overall, interest rates are the lowest we’ve seen in a generation. Homeowners and first-time buyers getting a mortgage in the months ahead will likely enjoy a rate that will keep their borrowing costs low for the next few years. Indeed, borrowers who have renewed or refinanced a mortgage in the past year now pay interest rates that are nearly one point lower than their previous rate, according to an April report by the Canadian Association of Accredited Mortgage Professionals (CAAMP). But while securing an attractive interest rate may be the top priority for most borrowers, some low-rate mortgages available today offer limited flexibility. For example, “no frills” mortgages offer favourable rates, but may limit your ability to pay off your mortgage sooner. In addition, “quick close” financing deals offer attractive rate discounts, but many require a closing date within 30 days. This may not provide enough flexibility for sellers or buyers. When it comes to choosing a mortgage, getting a good rate is just the tip of the iceberg. To ensure smooth sailing, you have to be aware of all the other features that may lie below the surface. The features of a mortgage should fit a homebuyer’s personal goals, both now and down the road. Borrowers need to understand what they’re signing up for – a mortgage is the largest debt most consumers will ever take on. Below are five tips prospective mortgage holders may consider when choosing a mortgage: 1. Consider an assumable mortgage 2. Review refinancing penalties 3. Evaluate pre-payment options 4. Review skip-a-payment options 5. Consider portability Choosing the right mortgage involves considering where you are now, and where you may be three to five years from now.
How to Pay Off Your Mortgage Faster and Save Thousands of Dollars
When a mortgage company has a small overhead cost to stay in business it typically means that they will not charge you unreasonable ongoing service fees. Make sure you know the fees charged by your mortgage company before you sign on a loan.
A bi-weekly mortgage payment means you make 26 half-monthly payments instead of 12 monthly payments. But keep in mind that unless your initial mortgage is set up as bi-weekly, some lenders charge an upfront fee of $300-$400 to make bi-weekly payments, and even though you're making a payment every two weeks, the lender only applies it once a month.
Use your tax refund, work bonus or any extra money you can save and apply it directly to your principal amount. Check your mortgage documents to find out how often you can prepay and in what amount. Many loans don't prohibit you from doing this, however the lender may have parameters on how many extra payments you can make. Ask this question when shopping for a mortgage loan.
5. Pay as much as you can at renewal time.
Most mortgages become open at renewal. This means you can pay as much as you want on your mortgage. If you chose a 5-year, fixed-rate term, and made a $10,000 lump-sum payment every time your mortgage came up for renewal, you would save about $37,481 in interest over the entire amortization period of your mortgage.
Always check your mortgage statement to make sure that any extra payments you made are being counted against the principal and that your bank has accurately documented your payments. Make the extra principal payments on a separate cheque and make a note on the memo line stating that the payment should be applied to principal reduction only. At tax time, tally up those payments and make sure they've been applied correctly.
Once you have a mortgage, aside from making the payments, it's easy to forget about it altogether. By keeping up-to-date on interest rates and new products could save you money. You may want to shop for another product that better suits your needs. For example, to qualify for a mortgage, you may have started out with a lower-rate adjustable rate mortgage, but you want to switch to a more long-term affordable fixed-rate mortgage later.
While paying down a mortgage quickly may be a wise decision for many homeowners, it's not for everyone. For example, you may want to switch to investing in mutual funds when yields return 10-12% annually. For most people though, this is not a mathematical issue but one of security, as they just want that mortgage paid off. For people who are very debt-averse, the peace of mind of paying off the house more quickly is worth the price.
A few years from now when you decide to sell your home, your low-rate mortgage could provide an extra selling point. If your mortgage is assumable, meaning it can be transferred to another borrower, it allows the purchaser to take on your mortgage’s terms and payments as part of the sale. This can be an attractive incentive, particularly in a higher rate environment.
Given the low rates available today, many homeowners are weighing the benefits of refinancing. When choosing a mortgage, keep in mind that penalties are often the equivalent of three months’ mortgage payments, or based on an interest rate differential, which is the difference between your current rate and the new rate. If you consider refinancing, a mortgage broker can help you decide whether the long-term savings outweigh the up-front penalties.
Many borrowers are taking advantage of low interest rates by accelerating payments on their mortgages. For example, many lenders allow you to double up payments periodically, or make lump-sum payments of up to 20 per cent of the principal once a year. When negotiating your mortgage, make sure you understand the size and frequency of payments your lender allows.
Some lenders offer an option to skip a payment without penalty, which may come in handy in today’s economy.
Many mortgages have a portability feature that allows you to transfer your existing mortgage over to a new property, but not all portability terms are the same. Some lenders allow as long as 120 days to transfer the mortgage, but others only allow for a few days or a week.
Bank of Canada Lowers Key Rate by a Quarter Point
APRIL 21, 2009
The Bank of Canada reduced its key interest rate by a quarter point today to its lowest level ever. In its announcement the Bank also stated that it expects to hold this policy rate at its current level until the end of the second quarter of 2010, conditional on the outlook for inflation.
While rates for variable rate mortgages are typically impacted by Bank of Canada policy rate changes, what’s interesting is that rates for popular five-year fixed rate mortgages have been declining significantly in recent months. The reason behind this drop is an abundant supply of money being put into circulation, as well as guarantees of government agencies to purchase mortgage investments.
A comparison of fixed rates today versus six months ago shows a noticeable improvement in purchasing power.
Six months ago, a competitive rate on a five-year fixed mortgage was 5.75 per cent. At this rate, the monthly payment on a $250,000 mortgage with a 25-year amortization was $1,563. With the five-year rate of 3.95 per cent available today, the monthly payment falls to $1,308, which adds up to a savings of $15,300 in payments over the five year term.
Click here to get the latest rates from Inivs.ca or contact Cindy Pusateri for all you mortgage needs.
*Check with your Mortgage Consultant for full variable-rate mortgage pricing details.
Rates are subject to change without notice. Fixed mortgage rates shown in table above and quoted variable mortgage rates are available nationally to qualified individuals. Lower rates may be available in certain regions, or to those with higher credit scores or higher net worth – check with your Mortgage Consultant for full details.
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Bank of Canada Cuts Key Rate by Half a Percentage Point - March 3, 2009The Bank of Canada reduced its key interest rate by half a point today to its lowest level ever. The Bank has cut this key rate by four percentage points since December 2007. In its announcement the Bank stated that this rate is to remain at its current level or lower until there are “clear signs” that the economy is recovering.
The Bank also noted that “The effects of the recent aggressive monetary and fiscal policy actions in Canada and other major economies will begin to be felt in the second half of this year and will build through 2010. Once the global financial system stabilizes and global growth recovers, the underlying strength of the Canadian economy and financial sector should ensure a more rapid recovery in Canada than in most other industrialized economies.”
An Invis mortgage professional can explain current trends in interest rates, and their effect on mortgage pricing. Those with existing variable rate mortgages will benefit directly – these mortgages are linked to the prime rate. However, there can be some variation in when, or to what degree, lenders react to a Bank of Canada rate announcement. There are lenders who change immediately after a Bank of Canada rate move, while some lenders re-set their prime rate on the first of the month following and some even do so quarterly. In addition, after recent rate announcements by the Bank, some lenders matched the Bank’s drop only after a delay, and some did not match the full rate cut.
Currently, pricing for new variable-rate mortgages is typically above the prime rate. Those looking for a new variable-rate mortgage may wish to get pre-approved, to protect themselves if variable-rate pricing in relation to prime continues increase in the next few months.
Pricing for fixed-rate mortgages is not directly affected by today’s announcement. However, some fixed rates have been trending downward in recent week.
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*Check with your Mortgage Consultant for full variable-rate mortgage pricing details.
Rates are subject to change without notice. Fixed mortgage rates shown in table above and quoted variable mortgage rates are available nationally to qualified individuals. Lower rates may be available in certain regions, or to those with higher credit scores or higher net worth – check with your Mortgage Consultant for full details.
Call Cindy today if you need more info on mortgages, the best rates and expert advice on how to pay off your mortgage sooner.
Click here to get latest rates from INVIS
Contact Cindy Pusateri at Invis today! 416-926-0529
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Looking for a down payment on a home? Check your RRSPs
New rules enhance the Home Buyer’s Plan program
If you’re a first-time homebuyer, with the federal Home Buyer’s Plan you may be eligible to withdraw funds from your registered retirement savings plan (RRSP) for a down payment when buying or building a qualifying home. Under the program you can now withdraw up to $25,000 without tax penalties, according to measures announced recently in the 2009 Federal Budget.
Here is a basic overview of some of the rules:
• You must be considered a first time homebuyer, i.e. you cannot have owned an owner occupied home in the previous five years.
• You must be a Canadian resident.
• The property purchased must be for a principal residence.
• The RRSP must be repaid within 15 years, with minimum annual payments of 1/15th of the withdrawn amount.
• Funds must have remained in your RRSPs for a minimum of 90 days before they can be withdrawn under the Home Buyers Plan.
• You will have to complete Form T1036, “Home Buyers Plan (HBP) – Request to Withdraw Funds from an RRSP” available at the Canada Revenue Agency website www.cra-arc.gc.ca in the RRSP section.
No RRSPs? An Invis mortgage professional can show you how to establish an RRSP with borrowed funds, and use the resultant tax refund for a down payment.
Be sure to talk to a mortgage professional about how to make this program work for you.
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Looking for a down payment on a home? Check your RRSPs
New rules enhance the Home Buyer’s Plan program
If you’re a first-time homebuyer, with the federal Home Buyer’s Plan you may be eligible to withdraw funds from your registered retirement savings plan (RRSP) for a down payment when buying or building a qualifying home. Under the program you can now withdraw up to $25,000 without tax penalties, according to measures announced recently in the 2009 Federal Budget.
Here is a basic overview of some of the rules:
• You must be considered a first time homebuyer, i.e. you cannot have owned an owner occupied home in the previous five years.
• You must be a Canadian resident.
• The property purchased must be for a principal residence.
• The RRSP must be repaid within 15 years, with minimum annual payments of 1/15th of the withdrawn amount.
• Funds must have remained in your RRSPs for a minimum of 90 days before they can be withdrawn under the Home Buyers Plan.
• You will have to complete Form T1036, “Home Buyers Plan (HBP) – Request to Withdraw Funds from an RRSP” available at the Canada Revenue Agency website www.cra-arc.gc.ca in the RRSP section.
No RRSPs? An Invis mortgage professional can show you how to establish an RRSP with borrowed funds, and use the resultant tax refund for a down payment.
Be sure to talk to a mortgage professional about how to make this program work for you.
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