REALTORŪ.ca
Home Buy Homes Sell Homes Boards & Associations Help Site Map

realtylinkonline

        now viewing: REALTYLINK INPRINT ARTICLE

August 2002

Kick down your mortgage now in just six steps

There's no question, buying a home is a big investment. Whether you're a first-time buyer or you're refinancing your home, you'll want to save as much money on mortgage payments as you can. Here's how:

  1. Shop around: Lenders often 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 cut your monthly payments. Compare rates by contacting several financial institutions. Try the Internet for up-to-date information on rates and terms and then visit your financial institution to negotiate.
  2. Go short: Shorten your loan repayment period or amortization period and you'll pay your mortgage down quickly. Yes, you'll pay higher monthly payments, but you'll make big gains in building up equity and you'll pay less in total interest over the life of the mortgage.
  3. Prepayment option: 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. Prepayment may be limited to specific amounts and times.
  4. Pay more and pay less: Frequent payments save you money. 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.
  5. The more, the merrier: A larger down payment reduces your mortgage insurance cost. Mortgage insurance ranges from 0.5 to 3.75 per cent of your mortgage amount depending on your down payment. If your down payment is 25 per cent or more of the purchase price, mortgage insurance isn't required.
  6. Variety, 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. When interest rates decrease, you save.

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.