How to cut your mortgage costs

When you apply for a mortgage

  • Make the largest down paymentDown payment The money you put into buying a large item like a car or home.+ read full definition you can.
  • Pick the shortest amortization period you can afford.
  • Pick an accelerated bi-weekly payment option. This works out to 13 monthly payments each year.
  • Shop around for the best deal you can get.

 3 ways to pay down your mortgage more quickly

  1. Increase the amount of your payments.
  2. Make a lump-sum paymentLump-sum payment A large one-time payment of money.+ read full definition each year (prepayment) in addition to your regular payments. For example, apply any taxTax A fee the government charges on income, property, and sales. The money goes to finance government programs and other costs.+ read full definition refund or bonus to your mortgageMortgage A loan that you get to pay for a home or other property. Often the loan is for 20 years or more. You make a set number of payments for a set amount each year.+ read full definition.
  3. Keep your payment the same if you renew at a lower interest rateInterest rate A fee you pay to borrow money. Or, a fee you get to lend it. Often shown as an annual percentage rate, like 5%. Examples: If you get a loan, you pay interest. If you buy a GIC, the bank pays you interest. It uses your money until you need it back.+ read full definition.

Consider penalties for leaving early

If you plan to exit your mortgage before the end of your termTerm The period of time that a contract covers. Also, the period of time that an investment pays a set rate of interest.+ read full definition, find out the penalty you may pay. Learn how this penalty is calculated.

Special features

Only choose the special features you need, like:

  • Mortgage insuranceMortgage insurance Insurance you get to cover your mortgage payments in case you get sick, hurt, or die.+ read full definition Covers your mortgage payments if you lose your job.
  • Portability – Carry your mortgage with you when you sell your home and buy another one.
  • Prepayment optionsOptions An investment that gives you the right to buy or sell it at a set price by a set date. The buy right is termed a “call” option, and the sell right is termed a “put” option. You buy options on a stock exchange.+ read full definition Make extra lump sum payments.
  • An assumable mortgage – The buyer of your home can take over your mortgage.

Don’t just compare rates and features when you go mortgage shopping. Also consider penalties and fees. For example, look at mortgage prepayment penalties. Lenders must calculate and disclose these in a standardized way.

Key point

To cut your mortgage costs:

  1. increase your payments,
  2. make a lump sum payment every year, and
  3. keep the same payments if you renew at lower interest rate.
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