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Mortgage Tips

Should I wait for my mortgage to mature before renewing?

No, it is not necessary for you to wait until your mortgage matures before looking at Most lenders send out their mortgage renewal notices approximately ninety days before the mortgage maturity date, typically offering existing clients their posted interest rates. The rate you are being offered is usually not the best one. Always investigate the possibility of a lower interest rate with your local Mortgagebrokers.com professional in order to confirm which lender is currently offering the best rates at no cost to you. This protects you from paying a much higher interest rate on your renewing mortgage than you may need to.

How can you pay off your mortgage sooner?

The simplest way to accomplish this is to decrease your principal balance owing; thus, decreasing your interest obligation. There are a number of very feasible approaches to performing this task:

Increase Payment Frequency - Instead of paying monthly, consider paying bi-weekly. This simple step is very feasible for most working Canadians who are paid bi-weekly. It essentially is like making thirteen monthly payments in a twelve month calendar year and it can cut your mortgage amortization by up to five years while saving you tens of thousands of dollars.

Prepay - Use every advantage that the term of your mortgage offers you to prepay your mortgage. One way to do this would be to use your personal income tax refund to make a yearly pre-payment.

Increase Payments - Round up your bi-weekly payment. For example, if you have a bi-weekly payment of $531.59, round your payment to an even $550.00. This will have a profound effect on the total interest paid, and reduce the remaining amortization of the mortgage sooner.

What are the costs associated with buying a home?

Primarily, you have to make sure you have enough money for a down payment - the portion of the purchase price that you furnish yourself.

To qualify for a conventional mortgage financing, you will require a down payment of 20% or more. However, you can qualify for a low down payment insured mortgage with a down payment as low as 5%.

Secondly, you will require money for closing costs (up to 1.5% of the basic purchase price). In Alberta it is very rare for closing cost to equal 1.5% of the purchase price.

If you want to have a home inspected by a professional home inspector - which we highly recommend if the home is older than one year - you will need to pay an inspection fee. The inspection may bring to light areas where possible repairs or maintenance are required and will assure you that the house is structurally sound. The inspector will provide you with a written report. If they don't, then be sure to ask for one.

You will be responsible for paying the fees and disbursements for the lawyer or solicitor acting on your behalf for the real estate transaction of the home in all provinces. We recommend that you shop around before making your decision on which law firm you will use because the fees for these services can vary significantly.

There are closing and adjustment costs, interest adjustment costs between buyer and seller and depending on which province you are purchasing in, a land transfer tax that is a one-time tax based on a percentage of the purchase price of the property and/or mortgage amount.

Finally, you will be required to have property content insurance secured by the closing date. In addition, you will be responsible for the cost of moving into the property.

Remember, there will be all kinds of things you will have to purchase early on - appliances, garden tools, cleaning materials etc. So factor these expenses into your initial costs.

What should the length of my mortgage term be?

The length of mortgage terms varies widely - from six months right up to 10+ years. As a rule of thumb, the shorter the term, the lower the interest rate the longer the term, the higher the rate.

While four or five year mortgages are what most home buyers typically choose, you may consider a short-term mortgage if you have a higher tolerance for risk, if you have time to watch rates or are not prepared to make a long-term commitment right now.

To better determine the best mortgage term suited to you, we suggest you answer the following questions:

1. Do you plan to sell your house in the short-term without buying another? If so, a short mortgage term may be the best option.
2. Do you understand the difference between fixed and variable interest rates and what the benefits versus the consequences of each type are?
3. Are you looking for security as a first-time homebuyer? Then you may prefer a fixed rate mortgage term, so that you can budget for and manage your monthly expenses.
4. Are you willing to follow interest rates closely and can tolerate a fluctuating mortgage payment in the event Prime rate changes? If that is the case, a variable/adjustable rate mortgage term may best suit your needs.

What are the monthly costs of owning a home?

You will have financial responsibilities as a homeowner.

Some of them, like taxes, may not be billed monthly, so do the calculations to break them down into monthly costs. Below you will find a list of these expenses.

The Mortgage Payment
For most homebuyers, this is the largest monthly expense. The actual amount of the mortgage payment can vary widely since it is based on a number of variables, such as interest rate, mortgage term, insurance premiums (if applicable) and length of amortization.

Property Taxes
Property tax can be paid in three ways - remitted directly to the municipality by you, in which case you may be required to periodically show proof of payment to your lender each year. Depending on the lender, they can be collected and paid as part of your monthly mortgage payment or you can inquire with the local municipality where your property is located to register for the TIPP plan (if available) whereby the monthly taxes are auto-debited and paid directly to the municipality.

School Taxes
In some municipalities, these taxes are integrated into the property taxes. In others, they are collected separately and are payable in a single lump sum, usually due at the end of the current school year, be sure to confirm with the local municipal district office to clarify.

Utilities
As a homeowner, you will be responsible for all utility bills including heating, gas, electricity, water, telephone, and cable.

Maintenance and Upkeep
The costs of routine maintenance of your property can include such things as: painting, roof repairs, electrical and plumbing, furnace, walks and driveway, lawn care and snow removal. A well-maintained property helps to preserve your home's market value, enhances the neighborhood and, depending on the kind of renovations you make could add to the worth of your property.