Once again, as expected, the Bank of Canada reduced the overnight lending rate. This is good news for us in a variable rate mortgage as the rate went down another half a percent.
If you're in a variable and have been for the last year you've seen some great savings. If you've kept your payments at the original amount, the savings are even more drastic, in the long run, not up front. This will cut years off your mortgage.
No one knows how long it will take until the rate starts coming up, which is more than likely going to happen at some point in time. With fixed rates staying low, and potentially becoming lower, locking in in the near future will be a no brainer!
Take care
Thursday, April 24, 2008
Monday, April 7, 2008
10 ways to pay your mortgage down quicker
Tip #1 Seek the advice of a financial advisor who works for a set fee. Finding an independent financial advisor who works on a set fee, to work with you on your specific financial goals, is the best way to ensure that you get the best and the most unbiased financial advice. Rather than talking to someone at your bank or lending institution, who makes money based on their recommendations to you, work with an independent advisor who has nothing to gain from your decisions that you make.
Tip #2 Opt for a closed term mortgage rather than an open one unless you will be paying it off in full during the term. An open mortgage at a fixed rate of interest will carry a higher interest rate than a closed term mortgage will. Unless you need to pay off your mortgage during the term, it is always advisable to go with the closed term and know that you can always pay off the mortgage when you are looking at renewing without penalty. And, while you are in the term you can generally pay up to 10-20% of the mortgage without a prepayment penalty.
Tip #3 Pay your mortgage each week, or every two weeks. One great strategy to pay off your mortgage in a shorter period of time is to opt to pay your mortgage each week, or even every other week. Both options lower your interest paid over the term of your loan and also result in the equivalent of an extra month’s mortgage payment each year. Paying your mortgage in this way will take your mortgage from 25 years down to 21.
Tip #4 When your income increases, you should increase your mortgage payments. Let’s say you get a 5% cost-of-living raise each year at your place of employment. If you live like you never got a raise, spending what you did before the raise, and you send that extra 5% of your income to your mortgage, then you will never miss the money and your mortgage balance will drop a lot faster. This is a very painless way of paying down your mortgage without feeling like you are sacrificing your way of life in any way.
Tip #5 Pay down your mortgage with your income tax refunds each year. If you are in the position where you get an income tax refund each year, send that money directly off to your mortgage lender as an extra payment on the principle of your mortgage loan. You won’t miss the money in any way, and your mortgage will get a nice reduction which will save you a ton of interest over time.
Tip #6 Pay down your mortgage with windfall money which comes into your life. Just about everyone finds themselves with money they were not expecting at some point or another. Maybe you inherited some money from a distant relative or you got a nice holiday bonus at work? Take all of your extra windfall cash and send it, or a large portion of it, to your mortgage lender as a lump-sum payment towards your mortgage loan. Again, this is a way to whittle down your mortgage loan without feeling the pain of coming up with extra cash out of your month-to-month budget.
Tip #7 Maintain your payments even if you are able to renew your mortgage at a lower rate. When you renew your mortgage and find that you are able to get a lower rate (with the resulting lower payment) ignore the lower payment and continue to pay what you were paying before the new term took effect. All of the extra money paid will go towards the principle of your loan and once again you do not feel like you have to come up with extra money to make the extra principle payments with.
Tip #8 Round up you mortgage payments. Assume for a moment that your mortgage payment is $756 per month. You can very easily add extra principle payments on your mortgage by paying a more rounded number, such as $775 or $800 each month. Over time, by rounding up, the payments will lower your overall mortgage debt.
Tip #9 Squeeze extra money out of your budget or extra income. Most people have some money left over at the end of the month which is sitting in their checking accounts. Make a point to always squeeze out any available money and pay extra principle payments on your mortgage. Alternatively, if you have a second job or a way of earning extra income, use some of that money to pay down your mortgage.
Tip #10 Think about getting a variable rate mortgage. It has been shown that variable rate mortgages can save you money over time. If you can deal with the rate fluctuations, a variable rate mortgage is worth serious consideration.
Tip #2 Opt for a closed term mortgage rather than an open one unless you will be paying it off in full during the term. An open mortgage at a fixed rate of interest will carry a higher interest rate than a closed term mortgage will. Unless you need to pay off your mortgage during the term, it is always advisable to go with the closed term and know that you can always pay off the mortgage when you are looking at renewing without penalty. And, while you are in the term you can generally pay up to 10-20% of the mortgage without a prepayment penalty.
Tip #3 Pay your mortgage each week, or every two weeks. One great strategy to pay off your mortgage in a shorter period of time is to opt to pay your mortgage each week, or even every other week. Both options lower your interest paid over the term of your loan and also result in the equivalent of an extra month’s mortgage payment each year. Paying your mortgage in this way will take your mortgage from 25 years down to 21.
Tip #4 When your income increases, you should increase your mortgage payments. Let’s say you get a 5% cost-of-living raise each year at your place of employment. If you live like you never got a raise, spending what you did before the raise, and you send that extra 5% of your income to your mortgage, then you will never miss the money and your mortgage balance will drop a lot faster. This is a very painless way of paying down your mortgage without feeling like you are sacrificing your way of life in any way.
Tip #5 Pay down your mortgage with your income tax refunds each year. If you are in the position where you get an income tax refund each year, send that money directly off to your mortgage lender as an extra payment on the principle of your mortgage loan. You won’t miss the money in any way, and your mortgage will get a nice reduction which will save you a ton of interest over time.
Tip #6 Pay down your mortgage with windfall money which comes into your life. Just about everyone finds themselves with money they were not expecting at some point or another. Maybe you inherited some money from a distant relative or you got a nice holiday bonus at work? Take all of your extra windfall cash and send it, or a large portion of it, to your mortgage lender as a lump-sum payment towards your mortgage loan. Again, this is a way to whittle down your mortgage loan without feeling the pain of coming up with extra cash out of your month-to-month budget.
Tip #7 Maintain your payments even if you are able to renew your mortgage at a lower rate. When you renew your mortgage and find that you are able to get a lower rate (with the resulting lower payment) ignore the lower payment and continue to pay what you were paying before the new term took effect. All of the extra money paid will go towards the principle of your loan and once again you do not feel like you have to come up with extra money to make the extra principle payments with.
Tip #8 Round up you mortgage payments. Assume for a moment that your mortgage payment is $756 per month. You can very easily add extra principle payments on your mortgage by paying a more rounded number, such as $775 or $800 each month. Over time, by rounding up, the payments will lower your overall mortgage debt.
Tip #9 Squeeze extra money out of your budget or extra income. Most people have some money left over at the end of the month which is sitting in their checking accounts. Make a point to always squeeze out any available money and pay extra principle payments on your mortgage. Alternatively, if you have a second job or a way of earning extra income, use some of that money to pay down your mortgage.
Tip #10 Think about getting a variable rate mortgage. It has been shown that variable rate mortgages can save you money over time. If you can deal with the rate fluctuations, a variable rate mortgage is worth serious consideration.
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