For many people, a mortgage can be a stressful burden. However, with the right product and when managed properly, you can make your mortgage work for you. Not all debt is bad debt. Just like anything else in life, with a proper strategy and a good start, you can take full control of your mortgage and be free and clear faster.
It starts from the very beginning, the application process. The mortgage industry is now more complex and competitive than ever before. There are such a wide array of products and options available to the consumer, they must all be looked at and considered when applying for your mortgage. Whether you are working through a bank or with a mortgage broker, you must consider several factors when choosing a product that is right for you. Here are a few:
- What kind of flexibility do you have financially?
- What is your risk tolerance?
- What are your plans for the property you are buying? Investment home? Long term family home? Rental? Renovation?
- Do you have plans to extend your family in the near future?
- How stable is your income? Do you forecast a rise or fall in the next 3-5 years?
- What kind of pre-payment privileges does the lender allow?
These are just a few examples of the variables you need to consider. Once you have this plan in place, you need to decide on your payment schedule. Just by switching your payments from the traditional monthly set-up to an accelerated bi-weekly payment you can take years off of your amortization.
For example:
| Total Mortgage Amount | Interest Rate | Amortization (Years) |
| $300,000 Paid Monthly | 2.59% | 25.00 |
| $300,000 Paid Acc Bi-Weekly | 2.59% | 23.08 |
*Example Only. Rates, amortization and payments vary.
As you can see above, by making this simple change you will be mortgage free almost 2 years sooner. The estimated monthly payment on this mortgage is $1,357.38, what would you do with that extra money in your pocket month after month?
Another great way to be free and clear even sooner is by making lump sum payments at the end of each year if you are in a position to do so. By paying a $5,000 lump sum payment once per year on that same monthly mortgage, you will reduce your amortization from 25 years to 22.33 years.
If you are currently in a higher interest mortgage, speak to your mortgage broker and look into cost of re-financing. In some cases, the money saved by re-financing to a lower rate will outweigh the costs associated with breaking your existing mortgage and re-financing. You will be able to pay much more each month towards your principal and less towards interest. Always keep a finger to the pulse of the financial world. This could save you thousands of dollars every year. Make sure you sign up for our e-mail updates HERE to get the latest news and rates that could potentially save you thousands.
Planning for the future and being in a mortgage that suits your life can help you take control of your financial situation and be debt free sooner. The cost of borrowing has been very low over the past few years making credit more affordable, thus allowing housing prices to climb higher and higher over the passing years. But what happens when interest rates go higher and it is time to re-finance? Will you be prepared and able to handle the potentially larger payments that come? Nearly 30 percent of Canadian home owners own their home free and clear. If you start off with the right advice and plan properly, we can grow that number. Take control of your mortgage arrangements; don’t let your mortgage control how you live.
Have an idea for an article or something you would like to see posted? Post it in the comments below or on Facebook and we will do our best to produce it for you.
Have any questions, need any advice? Visit us at www.thefinancialforum.ca. Email us at mortgages@thefinancialforum.ca. Call us at (877) 335-4486.
VERICO The Financial Forum Ltd.
“Your Connection To A Better Mortgage”
Together, We Make Mortgages Easy!
