1.  Bi-weekly and weekly payments option

• Allows you to pay off your mortgage about 4 years sooner.
• Simplifies your budgeting by making your mortgage payment line up with you income payments.

2.  Extra payment options

• Paying extra amounts on your mortgage can give you tremendous interest saving over time.
• A 20% payment privilege allows you to pay off up to $20,000 per year on a $100,000 mortgage. Look for a mortgage that allows you to pay in smaller payments as you are able. Paying an extra $1000 periodically can help you pay off your mortgage faster.

3.  Reducing the CMHC fees on your purchase

• A mortgage for more than 80% of the purchase price of a property requires insurance by Canada Mortgage and Housing (CMHC) or GE Mortgage insurance. The greater your down payment, the less premium is charged by the insurance company. For example, if you have a 5% down payment, 3.75% of the loan amount is added to the mortgage. By increasing the down payment to 10% of the purchase price the premium can be reduced to 2.5%.
• Providing a 20% down payment means you avoid any additional insurance fee. Depending on your situation there are ways that you can structure your financing to avoid the CMHC or GE insurance premium. Contact me for more information on how this can be accomplished.

4.  The Advantage of a Bigger Down Payment

• The larger the down payment, the lower the amount of interest you will pay over the life of your mortgage.
• Note: it is rarely to your advantage to stretch yourself to increase your down payment by borrowing on credit cards or a line of credit at a higher interest rate.

5.  Short Term Rates vs. Long Term Rates

• A fixed rate mortgage guarantees you the interest rate for the term of the mortgage.
• A variable rate (sometimes called floating rate) changes with the going market rate.
• Historically, the lowest interest rates are offered on the shorter term mortgages.
• A longer term mortgage may be at a higher interest rate but if the rate is fixed, then you are guaranteed this rate and can plan your payments accordingly.
• While a lower interest rate means you save on interest payments, you also take the risk that the rates may increase, and your payments will therefore increase.