Switching Mortgage Lenders

Mortgage Tips Maggie Yam 16 Oct

Mortgages normally have a maturity date. You can either renew your mortgage term with your existing lender or switch to a new lender. When renewing a mortgage, banks typically offer relatively higher interest rates. In other words, switching directly to another bank with a lower mortgage rate can save on interest expenses.

For example: the renewal rate from the original bank is 5.7%, but transferring to another bank may offer 5%, a difference of 0.7% in interest. For a $400,000 loan amount with a 20-year repayment period, this could save up to $9,000 over 5 years. Moreover, you can also choose more favorable mortgage terms and conditions, such as prepayment amounts.

If you are considering switch your current mortgage, let’s schedule a call and talk about it!

How to Pay Off Your Mortgage Faster

Mortgage Tips Maggie Yam 16 Oct

Dreaming of being mortgage-free? Here are some effective strategies to accelerate your payoff:

1. Review Your Payment Schedule: Switching to an accelerated bi-weekly payment plan can add an extra payment each year, reducing your amortization period by several years.

2. Increase Your Payments: Many lenders allow you to increase your payment amount by 10-20% without penalties. Apply any extra funds, like raises or bonuses, directly to your mortgage.

3. Make Extra Payments: Use pre-payment privileges to make additional annual lump-sum payments or increase your regular payments. This can help reduce your mortgage balance faster.

4. Negotiate a Better Rate: Consider refinancing to secure a lower rate, especially if your mortgage is up for renewal. This can lower your overall payments and interest costs.

5. Refinance to a Shorter Term: Refinancing to a shorter amortization period will increase your monthly payments but reduce the total interest paid over the life of the loan.

Note: Not all options are available with every mortgage. Check your agreement or contact me to explore what’s possible without penalties.

For personalized advice on paying off your mortgage faster, let’s schedule a call with me and talk about it!

5 Key Things to Avoid After Applying for a Mortgage

Mortgage Tips Maggie Yam 16 Oct

A client once reached out with a crucial question: “Can I finance a car now? Will it impact my current mortgage application?” I’m glad she asked before making any decisions.

Consistency is important once you’ve submitted your mortgage application. To avoid jeopardizing your chances, discuss any changes in income, assets, or credit with your mortgage broker. Transparency is key to keeping your application on track.

Here’s what you should avoid doing until your mortgage is finalized:

1. Making Large Purchases: Significant expenses can alter your financial profile and raise red flags.

2. Changing Bank Accounts: Keep your accounts stable to avoid complications with your financial history.

3. Applying for New Credit Card or Closing Accounts: This can affect your credit score and overall financial stability.

4. Depositing Big Cash: Ensure you discuss any cash deposits with your bank or lender first to avoid potential issues.

5. Co-signing Loans: Taking on additional financial obligations can impact your mortgage application.

Always consult with your mortgage broker before making any financial moves. We’re here to guide you and ensure your application process goes smoothly.

5 Ways to Reach Your Down Payment Goals

Mortgage Tips Maggie Yam 15 Oct

Our busy lives leave little room for savings, making homeownership feel out of reach. However, by shifting your mindset and prioritizing savings, along with small expense cuts, you can gradually work toward your goal. With dedication and a clear plan, owning a home can become possible.

Here are 5 Ways to Reach Your Down Payment Goals:

1. Set up an automatic transfers from your paycheque account to savings account monthly.

2. Cut Unnecessary monthly expenses, such as daily coffee or clothing.

3. Put aside raises, bonuses & tax refunds.

4. Borrow from your RRSP. The Home Buyers’ Plan allows buyers to withdraw up to $60,000 from their RRSP for a down payment, with couples able to combine this for a total of $120,000, as long as it is repaid within 15 years.

5. Get a side hustle (new income stream).

Meanwhile, remember to consult a professional Mortgage Broker for more information to help you successfully get into the market.

25-Year VS 30-Year Amortization

Mortgage Tips Maggie Yam 15 Oct

If you‘re aiming to borrow the maximum amount, a 30-year term is the ideal choice. However, if you’re planning to make a larger down payment and are unsure which term suits you best, it‘s important to understand the differences between the two options.
The main difference between 25-year amortization and 30-year amortization is the length of time it takes to pay off the mortgage and the monthly payments.
For the monthly payments, with a 30-year amortization, your monthly payments will be lower because the loan amount is spread out over a longer period of time. Conversely, with a 25-year amortization, your monthly payments will be higher because the loan is repaid more quickly.
For Example: If you borrow $500,000 at a 4% interest rate:
Over 30 years, your monthly payment will be around $1,902.
Over 25 years, your monthly payment will increase to around $2,104.
In comparison, the monthly payment difference is about $200 per month, which adds up to approximately $2,400 in a year.
For total Interest Paid, you will pay more interest with a 30-year amortization over the life of the loan because the loan is outstanding for a longer period, causing more interest to accrue.
With a 25-year amortization, you’ll pay less total interest, as you‘re paying off the principal faster, reducing the amount of interest accumulated over time.