Smart Strategies for Saving Money on a Mortgage
In an era with higher mortgage rates and economic turmoil, Canadians are looking to save money on their mortgage now more than ever. Efficiently managing mortgage payments can help reduce the total costs of borrowing over the life of the mortgage. This savings can add up to thousands of dollars back in the pockets of Canadian homeowners. Here are some strategies to help homeowners save money on their mortgages.
- Compare mortgage terms and rates. A lower rate is not always the best deal when it comes to mortgages, so make sure to look into the terms as well. Thoroughly researching the options can help save money, not only in rates but also for things like early renewals, transfers, pre-payments and more. Not all mortgages are created equally so fully understanding the mortgage product can help save money down the line.
- Consider a shorter term. While this may seem counterintuitive to some as monthly payments are higher, shorter terms save you money if rates move down in the future. This could also be helpful for those who might be considering moving, expanding their family and needing more space, or otherwise ending their mortgage earlier than the 5- or 10-year terms available.
- Avoid late payments and other fees. Prioritize mortgage payments, especially if your funds are tight, to avoid paying additional fees for missing or late payments. In addition, staying up to date with mortgage payments can help save money in the long term by allowing lenders to provide favourable rates at renewal. Make sure to know the requirements around pre-payments and payment changes to avoid penalties and fees with overpayments or extra payments. Late payments on your mortgage can impact your ability to be a homeowner in the future.
- Make bi-weekly payments. Instead of choosing a single monthly mortgage payment, opt for accelerated bi-weekly payments. This frequency of payments can help save on interest by making more frequent payments. In addition, biweekly payments contribute 26 payments per year, which will pay down the principle balance of the mortgage, effectively saving even more money during the life of the mortgage.
- Use mortgage pre-payment or monthly payment increase opportunities. Some mortgages allow for lump sum payments, pre-payments and increases in monthly payments each year. There are often limitations to this, so make sure to review these prior to making additional payments as penalties may apply otherwise. These additional payments or increases help to pay down the principle amount of the mortgage faster and can save thousands on interest overall.
- Consider refinancing. When rates drop or when debts get out of hand, refinancing a mortgage may help to save money. Consumer credit cards often carry high interest rates and refinancing these into the mortgage can help save thousands on interest. Refinancing a mortgage, depending on where it is in the term, may have high penalties and fees, so make sure to consult an expert to ensure the benefits will outweigh the fees.
By using one or more of these strategies, Canadian homeowners could potentially see a significant savings in the overall costs of a mortgage and/or monthly payments. With a proper research and plan in place, saving money on a mortgage in Canada is possible. By shopping around for the best rates, considering a shorter amortization period, making bi-weekly payments, increasing mortgage payments, avoiding penalties, and utilizing prepayment options, it's possible to reduce mortgage costs and achieve financial freedom sooner. Partnering with a mortgage expert from iSask Mortgage Brokers can help Canadian homeowners achieve their financial dreams. Reach out to chat with us today.