Royal Lepage Real Estate Services Ltd., Brokerage
905 King St. W, Toronto
office 416.205.0355
Short Term Rates vs. Long Term Rates
The options for mortgages available can be very confusing for most mortgage shoppers. Terms for mortgages vary between variable and fixed rate, 6-month terms to 10 year terms. Taking a variable or floating rate mortgage can have savings. Typically the shorter the term or guarantee of the rate, the lower the rate will be. This does not always happen, depending on the market place and the economy, but history has shown that short-term rates tend to be lower than long-term rates. The up side of variable rate is the strong potential for interest rate savings. The down side is the fact that you are accepting the interest rate risk without a guarantee. If you are considering a variable rate mortgage you need to look at your own risk tolerance, and your cash flow available to deal with potential increased payment. Considering projections of rates and where we see interest rates heading can also be important in this decision. Make sure you talk to an expert when you are making this decision.
Monthly Payments?..... Consider Bi-weekly or Weekly Payments
Most mortgages have the option to allow payments to be made on a weekly or bi-weekly basis. This option may be desirable for two reasons. The first is it can save you money as you can expect to pay off your mortgage about 4 years sooner. This can save you dramatically over the life of your mortgage. The other reason why these options are so popular is that if your employer pays you on a weekly or bi-weekly basis, you can simplify your budgeting by making the payment line up with the way you paid.
Consider Making Extra Payments
Paying extra amounts on your mortgage can make a big interest saving over time. When you select a mortgage company, privilege payments options are something that should be considered. A 20% privilege payment will allow you to pay off up to $20,000 per year on a $100 000 mortgage. It is important that the privilege payment also be flexible to allow you to pay smaller payments on the mortgage and as often as you wish. An extra $1000 periodically paid on a mortgage can help you become mortgage free faster.
Reduce the CMHC Fees on Your Purchase
A mortgage for more than 75% of the purchase price of a property must be insured by Canada Mortgage and Housing (CMHC) or GE Mortgage insurance. The premium charged by these company`s decreases as the down payment increases. When you finance your property at 95%, a premium of 2.75% is added to the mortgage. By increasing the down payment to 10% of the purchase price the premium can be reduced to 2.5%. If you can put down 25%, you can avoid any additional insurance fee.
Advantage of a Larger Down Payment
As mentioned above, when you put a 25% down payment on your purchase you can avoid the CMHC premium. More importantly the larger the down payment, the lower the amount of interest you will pay over the life of your mortgage. It is important to note that it may not be wise to stretch yourself to increase your down payment and end up borrowing on credit cards or a line of credit at a higher rate.
Information should be verified by your lending institution.
Mortgage Amount
Enter the amount of money you want to borrow.
Interest Rate
Enter the interest rate you would like to use for calculating your payment.
Amortization Period
Enter a number representing over how many years you would like to repay your mortgage. The standard is 25 years.
Mortgage Payment
The mortgage payment is the amount the borrower would finance in order to pay off the desired loan. The payment corresponds to the selected frequency.
Payment Frequency
Select how often you would like to make your mortgage payments. Number of payments per year:
Monthly: 12 (once a month).
Semi-Monthly: 24 (twice a month).
Bi-Weekly: 26 (once every two weeks).
Weekly: 52 (once a week).
Annual Prepayment
The amount of principal you are allowed to pay off every year without paying a penalty to the lender. Usually expressed as a percentage of the original mortgage balance.
All information displayed on this site is believed to be accurate but is not guaranteed and should be independently verified. No warranties or representations are made of any kind.
