Being a Realtor, I am always facinated by the articles on Finance. I read this article in Toronto Star showing us how to save on your Mortgage and few other facts on Mortgage.
If you are First time buyer , buying your next house or buying a real estate as investment is always good know that how you can save on your mortgage.
Do you know that when it comes to find the best rate First time buyer gets the best rate and option as they shopped around, have tight budgets and so fight for every basis point.
The economists found that people who switch banks get a better deal than existing customers, because new customers offer the banks an opportunity to sell more products. So when it comes to mortgage loyalty does not pay well.
The best way to figure out about your choices are: to compare prices and features, read the fine print on contracts and keep an eye on developments in the news. In this respect, the Internet has been a great leveler. The study also found that mortgage brokers find the best rates . Mortgage brokers are paid by the lender so they aren’t confined to one lender’s products. Their business is very competitive, so the pressure to find the very best rates is high. The study noted that brokers “are a significant factor driving discounts,” reducing the cost of a mortgage on average by 17.5 basis points.
When it comes to saving on your mortgage, there are lots of ways to cut your interest costs, such as
1. Making pre-payments 2. Shopping around at renewal time. 3. Borrowing as little as you can
4. Making as large a down payment as possible.
For instance, say you’re purchasing a home for $200,000.
With a down payment of 20%, or $40,000,
your monthly mortgage payment would be $930.57,
Your interest cost will be $119,170, at an average interest rate of 5 %, amortized over 25 years.
But, if you can put down 25 %, or $50,000, your monthly payment would be $872.41 and your total interest cost would be $111,722 — a savings of about $7,400.
Most mortgages offer pre-payment privileges that let you pay an extra 10 to 25%, per payment or per year. Those payments go directly to the principal and can take years off your
mortgage.
Simply changing from monthly payments to accelerated bi-weekly payments will pay off the mortgage about four years sooner, with an overall savings of more than $25,000 in interest.
If your mortgage is up for renewal ,get the current lower rate, but don’t change your payment.
For example, if you’re renewing a mortgage from five years ago and your rate is 5.75% and your payment on a $200,000 mortgage was around $1,200, at today’s rates, it would drop to about $900. So If you can keep making the $1,200 payment, every payment, you’ll be whacking an extra $300 off your mortgage balance. You could literally pay off yr mortagage earlier than u imagine.
Financial planning experts say that, when it comes to saving for retirement, it’s best to start early and save often, even in small amounts.The same principle applies to money that you owe for 25 or 30 years,That extra payment goes to the principal ,that extra dollar gets applied to it’s the last dollar.
What happens when you have closed fix rate mortgage and you wants early exit from your mortgage.
There are few things we should know about Mortgage penalty.
If interest rates go up after you take out a closed mortgage, you can usually get out early by paying a penalty of three months’ interest. Your lender can sign up a new borrower at a higher rate.
But if interest rates go down, you have to pay a penalty that is much higher than three months’ interest. It is based on the interest rate differential (IRD) between your initial rate and the current rate until the end of the term.
An IRD penalty can be a shocker, since your lender wants compensation for having to break your higher-rate mortgage and sign up a new borrower at a lower rate. Lenders calculate these penalties as they wish. There isn’t a formula that everyone has to follow. If you received any rate discounts or cashback rewards when you took out the mortgage, you may have to pay them back on your way out the door. This, too, inflates your penalty.
It is best to find out if the lender is giving you a discount that will be thrown into the IRD calculation when you get out of a mortgage prematurely and how the penalty is calculated. If
you see anything that says you must pay for the discount or some other extra cost. then you must choose what is best for you.
So choosing the low rates is not the only criterion when choosing a lender but also to keep in mind what is the option for early payment of mortgage or exit prematurely should be
also the question you should be asking your lender.
Choose wisely and live happily after that..
If you are First time buyer , buying your next house or buying a real estate as investment is always good know that how you can save on your mortgage.
Do you know that when it comes to find the best rate First time buyer gets the best rate and option as they shopped around, have tight budgets and so fight for every basis point.
The economists found that people who switch banks get a better deal than existing customers, because new customers offer the banks an opportunity to sell more products. So when it comes to mortgage loyalty does not pay well.
The best way to figure out about your choices are: to compare prices and features, read the fine print on contracts and keep an eye on developments in the news. In this respect, the Internet has been a great leveler. The study also found that mortgage brokers find the best rates . Mortgage brokers are paid by the lender so they aren’t confined to one lender’s products. Their business is very competitive, so the pressure to find the very best rates is high. The study noted that brokers “are a significant factor driving discounts,” reducing the cost of a mortgage on average by 17.5 basis points.
When it comes to saving on your mortgage, there are lots of ways to cut your interest costs, such as
1. Making pre-payments 2. Shopping around at renewal time. 3. Borrowing as little as you can
4. Making as large a down payment as possible.
For instance, say you’re purchasing a home for $200,000.
With a down payment of 20%, or $40,000,
your monthly mortgage payment would be $930.57,
Your interest cost will be $119,170, at an average interest rate of 5 %, amortized over 25 years.
But, if you can put down 25 %, or $50,000, your monthly payment would be $872.41 and your total interest cost would be $111,722 — a savings of about $7,400.
Most mortgages offer pre-payment privileges that let you pay an extra 10 to 25%, per payment or per year. Those payments go directly to the principal and can take years off your
mortgage.
Simply changing from monthly payments to accelerated bi-weekly payments will pay off the mortgage about four years sooner, with an overall savings of more than $25,000 in interest.
If your mortgage is up for renewal ,get the current lower rate, but don’t change your payment.
For example, if you’re renewing a mortgage from five years ago and your rate is 5.75% and your payment on a $200,000 mortgage was around $1,200, at today’s rates, it would drop to about $900. So If you can keep making the $1,200 payment, every payment, you’ll be whacking an extra $300 off your mortgage balance. You could literally pay off yr mortagage earlier than u imagine.
Financial planning experts say that, when it comes to saving for retirement, it’s best to start early and save often, even in small amounts.The same principle applies to money that you owe for 25 or 30 years,That extra payment goes to the principal ,that extra dollar gets applied to it’s the last dollar.
What happens when you have closed fix rate mortgage and you wants early exit from your mortgage.
There are few things we should know about Mortgage penalty.
If interest rates go up after you take out a closed mortgage, you can usually get out early by paying a penalty of three months’ interest. Your lender can sign up a new borrower at a higher rate.
But if interest rates go down, you have to pay a penalty that is much higher than three months’ interest. It is based on the interest rate differential (IRD) between your initial rate and the current rate until the end of the term.
An IRD penalty can be a shocker, since your lender wants compensation for having to break your higher-rate mortgage and sign up a new borrower at a lower rate. Lenders calculate these penalties as they wish. There isn’t a formula that everyone has to follow. If you received any rate discounts or cashback rewards when you took out the mortgage, you may have to pay them back on your way out the door. This, too, inflates your penalty.
It is best to find out if the lender is giving you a discount that will be thrown into the IRD calculation when you get out of a mortgage prematurely and how the penalty is calculated. If
you see anything that says you must pay for the discount or some other extra cost. then you must choose what is best for you.
So choosing the low rates is not the only criterion when choosing a lender but also to keep in mind what is the option for early payment of mortgage or exit prematurely should be
also the question you should be asking your lender.
Choose wisely and live happily after that..
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