Ed's
Mortgage Tips
1) The more frequent the compounding, based on
the same loan amount, interest rate and amortization period, the
more it costs you. The interest rate on a typical (fixed rate)
Canadian residential mortgage is compounded semiannually. Some
online calculators are set up for U.S. mortgages only, which
compound the interest monthly. Make sure your interest rate is
compounded semiannually. Example: For a $100,000 loan,
at an interest rate of 5% per annum, compounded semiannually, with
an amortization of 25 years, the monthly payment of principal and
interest is $581.60 (compounded monthly, it is 584.60). The
mortgage term is not needed for this
calculation.
2) Add the CMHC premium (2.75% from
April 22, 2005, for
a traditional 95% loan) to your loan before calculating the monthly
payment. Example: The above $100,000 loan becomes
$102,750, and the monthly payment is $597.60. Refer to the Home Buyers'
Seminar if your down payment is less than 20%.
3)
Mortgage payments, whether monthly, weekly or biweekly, should be
the same amount on all calculators, give or take a penny per
payment.
4) Accelerated weekly or biweekly mortgages will save
you thousands of dollars overall.
5) Negotiate a
lower rate than posted, or ask a mortgage broker to get you a better
deal. If using a broker, you may want to read the article "Mortgage Brokers May Save You Time and
Money."
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