Mortgage Tips and Tricks to Save You Money

If your mortgage is up for renewal or if you are a first time home buyer we’ve got some tips and tricks for you below to consider that could help save you money.

Tip #1: Ask About Prepayment Privileges

As interest rates rise, that means a larger portion of your monthly mortgage payments will go toward the interest instead of going against the principal. Asking about prepayment privileges can help you pay down your mortgage faster. These privileges can offer you the flexibility to prepay some of your mortgage principal prior to the end of the amortization period and without penalty. Be wary, some mortgage lenders may offer you their “best rate”, but it can come at the cost of not allowing you to make prepayments. Make sure you ask your lenders what kind of privileges your mortgage has, you may want to consider a higher rate in exchange for prepayment privileges.

Tip #2: Find Out the Penalties for Breaking Your Mortgage.

Sometimes life throws you a curveball and forces you to make changes you didn’t plan. A transfer for work, changes in your marital or financial status are some things that could require you to sell your home early. When you do this it is called “breaking” your mortgage and that can mean penalties. In Canada, if you have a variable-rate mortgage, you would typically have to pay 3 months of interest. If you have a fixed rate mortgage, you’ll have to pay the greater of either 3 months of interest or the interest rate differential (IRD), which is based on current mortgage rates and your remaining balance. There are two ways to avoid mortgage penalties however. First, a portable mortgage provides you with the option to transfer your mortgage to your new home and even combine it with a new loan if necessary. You can also get an assumable mortgage which allows you to pass your mortgage to another qualified buyer instead of having to break it.

Tip #3: Weigh the Benefits of a Down Payment of Less than 20%.

Common thinking is that making a mortgage down payment of at least 20% will automatically guarantee you the “best” rate, but that is not always the case. While surprising, lenders actually tend to offer the best interest rates to high-ratio mortgage borrowers, meaning those who need mortgage insurance because they have put less than 20% down. This insurance makes the mortgage borrower low-risk against loss. In turn, that makes it cheaper for your lender to fund the mortgage loan, meaning they can pass along lower rates to you.

Bonus Tips

Do Your Rate Research: A bank’s posted rates are typically not their lowest. Shop around and compare rates.

Consider a Broker vs. a Bank: Brokers have access to multiple lenders. This means they have access to competitive quotes.

Keep Your Credit in Good Standing: The best rates go to borrowers with the best credit scores.

Here at Jump Realty, all of our agents put their customers' needs at the forefront of their work. They’ll give you honest advice on what course of action is best for you in their professional opinion. If you are thinking about buying a new home or your first home, our agents can get you in touch with amazing lenders to make your process as easy as possible. All of our agents pride themselves on putting their clients' needs above all else. With offices in Windsor, Tecumseh, Kingsville, and Chatham, no matter where you are a Jump agent is ready to help. Please contact us for any housing needs and let us give you a better real estate experience!