Cost Saving Tips For Your Mortgage

Before we begin this blog we want to let you know that these are overall suggestions and this blog should not replace the advice of your mortgage broker or your bank bank. This should be used as a platform to help support your thinking with regards to your home mortgage.

Purchasing your home is likely the biggest financial decision you will make. This means – financing your home is very important!

There are multiple ways to save money on your mortgage. Below are a few tips on how you can hopefully save money on yours.

Cost Saving Tip One: Compare Rates Online

Comparing mortgage rates online can be done by easily using a national rate comparison site.

Some of the most popular sites are RateSupermarket and RateHub. When comparing rates make sure you select your province since rates can vary between the different provinces and some lenders only offer specific rates in certain provinces.

When you compare mortgage rates online look at the fine print. As a rule of thumb, the lower the rate, the more restrictions applied to the mortgage so make a list of pro’s and con’s of each rate before you head to your bank or mortgage broker so you can make an informed decision before you commit.

Cost Saving Tip Two: Understand Variable Vs. Fixed Interest Rates

One of the biggest factors in deciding between a fixed interest rate and a variable interest rate is your ability to handle risk. A variable rate tends to be a bit lower than fixed but the potential savings come at a risk: when rates rise your payment could also rise. This could be an issue if you don’t have any flexibility in your budget to handle a higher monthly payment. If you’re willing to take the risk, you can potentially save with a variable rate mortgage.

A fixed rate mortgage offers the security of knowing the rate, and monthly payments, won’t change over the mortgage term. Surprisingly, the appeal of safety and security is so strong that about 75% of borrowers choose to go with a fixed rate.

When interest rates rise, those with a fixed rate mortgage won’t be affected. Those with a variable rate mortgage might be affected. For some people, payments will not increase if interest rates rise because most major lenders do not change mortgage payments when this happens. Those people are not off the hook though, more interest will be paid in the long run because the mortgage amortization gets longer. This means a variable rate mortgage can offer the stability of predictable monthly payments even if rates do increase along with usually saving you money.

Cost Saving Tip Three: Negotiate With Banks

When negotiating with your bank you’ll want to consider your overall relationship with the bank – the more account or services you have with them, the better the odds you’ll be able to get a lower rate.

You’ll likely be able to negotiate a lower rate if you have a line of credit, unsecured loan, investment products or multiple bank accounts with the bank.

The best way to start negotiating is to do some quick research online to find the lowest rates currently available. Let your bank know what you are looking for and what you have found online. Negotiate with them and never take their first offer.

Cost Saving Tip Four: Pay Off Your Mortgage Quicker

Here are a few ways to pay your mortgage down faster and save yourself a lot of money on interest:

  • Shortening the amortization of the mortgage. 
  • Increase the payment frequency. If you switch the mortgage payments from monthly to bi-weekly it will mean two extra payments per year will be made that will go straight towards the principal.
  • Increase mortgage payments. Most mortgages allow you to increase the payment amount by up to 20% with the difference going towards the principal.
  • Lump sum payments. Most mortgages allow you to put a lump sum annually towards the principal.

Let us know if we can help! Or, contact Shawna MacDonald from The Mortgage Group. 

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