realtylinkonline

March 2002

Make the most of your mortgage

Buying a home is the biggest investment you’ll likely ever make. Whether you’re a first-time buyer or refinancing your home, saving money on mortgage payments means you’ll be financially ahead. Follow these tips to help reduce your mortgage costs.

You better shop around

To get the best rate, shop around. Lenders frequently discount the posted rate, from as low as a quarter of a percentage point to as high as a full percentage. Even a small difference in the rate will save you in your monthly payments. Compare rates by contacting several financial institutions. The Internet can be a great search tool for finding up-to-date information on rates and terms quickly.

The shorter, the better

Shorten the loan repayment period or amortization period and you’ll pay your mortgage off quicker. You will pay higher monthly payments, but you’ll make big gains in building up your equity. This means you’ll pay less in total interest over the life of the mortgage.

The choice is yours

A prepayment option lets you pay part of your mortgage principal before it’s due, reducing the amortization period. Restrictions usually apply and can include a prepayment penalty. As well, prepayment is often limited to specific amounts and times.

The more, the less

Frequent payments will save you money on your mortgage. Bi-weekly payments mean you’ll make 26 payments in a year, equal to 13 months of payments instead of 12. If you pay your mortgage weekly, instead of monthly, an amortization of 25 years will be reduced to about 18 years.

The more, the merrier

A larger down payment will reduce your mortgage insurance cost. For example, mortgage insurance ranges from 0.5 to 3.75 per cent of your mortgage amount depending on the down payment. If your down payment is 25 per cent or more of the purchase price, mortgage insurance is not required.

Variety is the spice

A variable rate is a mortgage with an interest rate and payments that can change over the term of the loan based on the current interest rate.

Know your options when you choose a mortgage and get one that best suits you. Your REALTOR® can recommend a mortgage consultant or financial institution.