About 30% of Canadian consumers have a housing loan. But the excitement of taking a mortgage and buying a house in Canada is so overwhelming that most forget to prioritize saving money. Your mortgage will take a couple of years to pay back, and you need the best deal for sustainability. Yes, that’s it! It’s not all about being nervous and overly cautious – but being smart and strategic with your financial decisions.
Ready to save money on your mortgage? Settle on the best mortgage rates and specifications, give a lump sum on your principal, opt for refinancing, and try making frequent mortgage payments. In addition, go for government incentives if you qualify, work on reducing other debts, and avoid loan penalties. Importantly, settle on the best online mortgage lender in Canada – BHM Financial Group is an excellent choice for you.
Good news: This article expounds on the ways mentioned above. Keep it here, as this is the best approach to relieve pressure on your finances and those unnecessary headaches when you unquestioningly accept unfavorable mortgage offers.
Let’s get into it!
Review Your Budget
You can free up many things from your budget and still live life to the fullest. The secret is to audit your bank, credit cards, and mobile money statements to understand your spending habits. Doing so leaves you with extra money to channel towards your home loan. That means more savings because you have more to pay on your mortgage ahead of schedule.
Go For the Best Mortgage Interest Rates
The interest rates charged on your mortgage will determine the total amount you’ll pay in the long run. Since mortgages run for many years, having manageable interest rates means you’ll have massive savings. Be on the lookout to get the best deals.
Online mortgage lenders like BHM now offer rates you’ll never get anywhere else. Check it out! Other ways to save money regarding interest rates include going for a short-term fixed-rate mortgage – say three years – or switching to an adjustable-rate mortgage when you plan to sell your house later.
Make a Lump Sum Payment on Your Principal
How about using the cash you’ve stashed on your mortgage principal? It might sound risky, but it’s a wise decision. Financial institutions allow you to give a lump sum capped at 10, 15, or 20 percent of your yearly mortgage costs. Go for it, and you’ll be relieved a lot over time.
An extra principal payment means:
- Easy time paying off your mortgage
- A possibility of a shorter loan payment period
- Reduced interest rates
- Less impact in case interest rates fluctuate down the line.
Photo from the movie “Duplex” (2003)
Refinance Your Mortgage
The pandemic era really raised home mortgage rates, forcing homeowners to pay the highest interest rates witnessed in Canadian history. As such, refinancing a home loan becomes a good option whenever a good chance presents itself. Refinancing, however, makes sense if it allows you to enjoy lower interest rates and affordable monthly payments.
Make Use of Mortgage Incentives
Are you a first-time home buyer in Canada? We have some good news for you. The federal and provincial territories have tax incentives you must take advantage of. These incentives save you the money you pay upfront for the mortgage. You only need to confirm the privileges you’re entitled to because terms vary based on your province.
Try Out Frequent Mortgage Payments
Accelerating your home loan payments means significant savings. There are different ways to do this. One option is channeling your extra money towards your principal – salary raises, bonuses, or other unexpected wins. Another alternative is setting up a fixed amount to add to your monthly payment and sticking to it. More so, consider weekly or biweekly mortgage payments. It’s doable if you commit to it.
Work on Your Other Debts
It’s frustrating when you have many debts to pay every month. It’s even worse when the interest rates attached to each debt are high because you’ll have to pay more. One option is to sort out small and urgent loans and focus on others. Another way is to reduce the loans through refinancing. Consolidate all your loans into a single mortgage and negotiate for low interest and reduced monthly payments. You’ll save thousands!
Limit the Loan Penalties
Penalties lower your monthly savings. And by the way, these are costs that many don’t notice until they see them on their home loan status. Lenders often charge penalties for late payments, which is evident in the mortgage loan agreement you sign. Note that some also have prepayment limits, and you are penalized when you exceed the indicated amount. Be cautious!
Shop for a Mortgage Loan Lender
It doesn’t matter whether it’s your first or fourth home; you need a lender that acts professionally – lenders you can trust. One in every four mortgage holders is between 45 and 54 years old. Whether below that age bracket or above, you need peace of mind as you pay for your loan.
Note that a quick online search helps, but you can do more. What about reaching out to the lender and speaking to them? You’ll get to know their perspectives. Good lenders are open-minded regarding loan requirements, credit scores, pre-approvals, and rates.
Bonus Tip: Avoid Mortgage Traps
Mortgages are meant to work for you – and not against you. A common trap is paying the mortgage insurance twice when you change lenders. If the loan amount hasn’t changed, you only need to forward the mortgage insurance number to your new lender to keep them informed of your payment.
Mortgage Savings: Quick Checklist
- Improve Credit Score: Better score equals lower interest rates.
- Shop for Lenders: Compare rates from various banks, credit unions, and online.
- Check DTI: Aim for below 36% for best rates.
- Larger Down Payment: Less loan, less interest.
- Negotiate Closing Costs: Ask for reductions.
- Shorter Loan Term: Higher payments, less interest.
- Consider ARMs: Good for short-term stays.
- Make Extra Payments: Reduces total interest.
- Refinance if Rates Drop: Can lead to savings.
- Review Property Taxes: Ensure accurate assessment.
- Reduce Energy Usage: Save on utilities, more for mortgage.
- Bi-Weekly Payments: Equivalent to one extra payment per year.
- Automate Savings: Set up automatic mortgage payments.
- Live Within Means: Avoid lifestyle inflation post-home purchase.
- Invest Windfalls: Use bonuses or refunds for mortgage payments.
Stressed About Your Credit Score Before Applying for Mortgage? We Got You!
There’s a reason why most Canadians are doing business with BHM Financial Group. Regardless of your credit score, we are highly professional, reliable, and prompt on mortgage approvals. We’ll have you taken care of from the beginning of the application to the end – we want you to secure an affordable and customized mortgage just for you. That’s the best way to save money!
Give us a call now; we are on standby to serve you!