3 Of the Best Time and Money Saving Mortgage Tips
posted in Mortgage News
Are you about to buy a home for the first time, or is your mortgage up for renewal? If so, then the following mortgage tips could help you to save time and money. And don’t forget, for all the latest mortgage advice and guidance, seek help from a qualified mortgage broker, who will give you unbiased help based upon your specific circumstances:
Talk to your broker about pre-payment privileges
Did you know that pre-payment privileges can help you pay off your mortgage faster? The more an interest rate rises, the bigger the portion of your monthly mortgage payments will go toward that interest, instead of the principal.
Pre-payment privileges give you the flexibility to prepay a percentage of the mortgage principal before the amortization period is up, and without having to pay a penalty. It might be that a lender offers you their so-called best rate, at the expense of not allowing you to make pre-payments on your mortgage during the set term.
Talk to your broker about pre-payment privileges and find out if the lenders they’re considering recommending, have an option for you to make any extra payments.
Are there any penalties for breaking the terms of your mortgage?
There are many life occurrences that could see you needing to sell your home before the end of your mortgage term, but did you know that there are often penalties for doing so? If you have a variable-rate mortgage with one of the big banks in Canada, you would often have to pay 3 months of interest to break the terms of your mortgage, and if you have a fixed rate, you’ll typically be required to pay the greater of either 3 months of interest or something called the interest rate differential (IRD); based upon current mortgage rates and the remaining balance of your mortgage.
Fortunately, if you work with a broker, they’ll be able to navigate you through this with minimal fuss, and will keep you updated as to what charges you might incur on any lender they recommend. They will also advise you of ways in which to avoid mortgage penalties, which is usually through a portable mortgage, or an assumable mortgage.
Discuss with your broker, the benefits of a down payment of less than 20%
You might be surprised to know that making a down payment of 20% or more, doesn’t automatically guarantee you the best rate. Generally, lenders offer their best interest rates to high-ratio borrowers, such as those who need mortgage insurance because they have put less than 20% down), and this is because such borrowers preset as a low risk against loss. Lenders will then have to pay less to fund the mortgage loan, enabling them to pass some of those savings back to the borrower in the form of lower rates. So, talk to your broker about this and see what they advise.
If this still sounds a little confusing, or you would simply like some more advice based upon your exact circumstances, schedule an appointment to see an independent mortgage broker today, and find out the best deals and rates for your mortgage or renewal.