HELPFUL BUYERS TIPS
BI-WEEKLY AND WEEKLY PAYMENTS
Most mortgages have the option to allow bi-weekly and weekly payments. This is a desirable option for a couple reasons: firstly, you can save yourself some money because you will pay off your mortgage a few years sooner. Secondly, a very popular buyer’s tip, your employer commonly pays you on a bi-weekly basis- this simplifies your budgeting by making the payments line up with the way you get paid.
MAKING EXTRA PAYMENTS
When you have a little bit of left over money, try paying an extra payment-this can make a big interest saving over time. When you select the mortgage company you would like to lend from make sure. 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 $100 periodically paid on a mortgage can help you become mortgage free faster.
REDUCING THE CMHC FEES ON YOUR PURCHASE
When you require a mortgage for more than 20% of the purchase price of a property, that mortgage must be insured by Canada Mortgage and Housing (CMHC). The premium charged will decrease as the down payment increases. If you can put down 20%, you can avoid any additional insurance fee. Depending on your situation there are ways that you can structure this financing to avoid the CMHC insurance premium.
ADVANTAGES OF BIGGER DOWN PAYMENTS
As mentioned above, when you put a 20% down payment on your purchase you can avoid the CMHC premium. Most importantly the larger your down payment, the lower the interest you will pay over the life of your mortgage. It is also important not to stretch yourself to increase your down payment and not being able to fully enjoy your new property- you don’t want to be house rich and cash poor!!!
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- Let me know if you would like me to recommend you to an expert in Vancouver.