Mortgage Tips

11 Tips to become Mortgage Free Faster

1. Determine your borrowing capacity

What level of debt are you comfortable carrying? Generally, you shouldn’t spend more than 32 per cent of your gross income on the mortgage, taxes and heating of your new home (include half of your condo fees, if applicable).

2. Make the largest down payment you can afford

The more you can pay up front, the less you’ll have to pay back later. You’ll save both principal and interest.

3. Use your RRSP for a down payment

Consider your RRSPs to help your down payment. Under the Home Buyers’ Plan, you can withdraw up to $25,000 ($50,000 per couple) from your RRSP with no tax withheld. There are pros and cons to this strategy, but it is generally recommended, especially if you would otherwise pay CMHC insurance. Ask your financial advisor.

4. Get a Credit Master Mortgage

Imagine not paying for a solicitor or notary for refinancing! A Credit Master Mortgage (available only through credit unions), allows you to borrow against your home value. Secure smaller loans (renovations, car loans) against your home and receive a better rate, saving both time and money.

5. Plan for other expenses too

Remember, you’ll have to pay legal fees, land transfer tax, utility hook-ups, inspection fees and moving costs. A slightly higher mortgage will be less expense than an additional loan or line of credit to cover these extra costs.

6. Choose a shorter length of time to repay your loan

Look at all the amortization options to see how opting for a 15-year period as opposed to a 20-year period or a 25-year period will affect your payments and total interest costs

7. Sleep easier with mortgage insurance

For just a few dollars a month, you can insure your mortgage in case of death, disability, critical illness or loss of employment. You can also talk to one of our trusted advisors in our wealth management offices about life, disability and critical illness insurance. Protect yourself and your family in the event of an unexpected loss of income.

8. Put that tax refund to good use

The average tax refund in 2010 was almost $1,500. Talk about a gift that keeps on giving; the new TV can wait, so put that refund towards your biggest expense—your mortgage!

9. Monthly, bimonthly, biweekly or weekly payments?

The more frequent the payment, the more substantial your savings over the term of the mortgage, meaning you’ll be debt free years ahead of time.

10. Prepayments: extra payments against principal

This is one of the most important features to look for when arranging a mortgage. This option allows you to make payments directly against your outstanding balance without incurring any fees or penalties. Some lenders offer the option of an additional payment amounting to only 10 per cent of the original mortgage balance; NDCU allows up to one prepayment of 20 per cent per year, exceptions may apply. Happy Anniversary payments!

11. Increase your regular payments

Double payments or a minimum of $100 is allowed on any regular payment date with a Fixed Rate Closed Mortgage.

For more information, please contact a Nelson & District Credit Union mortgage expert.

Information contained herein is compiled from sources believed to be accurate; however, the publisher assumes no responsibility for errors or omissions.

This list is for general information only and not intended to provide specific advice or recommendations for any individual.