Most mortgages have the option to allow payments to be made on a weekly or bi-weekly basis. This option may be desirable for two reasons. The first is it can save you money as you can expect to pay off your mortgage about 4 years sooner. This can save you dramatically over the life of your mortgage. The other reason why these options are so popular is that if your employer pays you on a weekly or bi-weekly basis, you can simplify your budgeting by making the payment line up with the way you paid.
Paying extra amounts on your mortgage can make a big interest saving over time. When we select a mortgage company, privilege payments options are something that we look for. A 20% privilege payment will allow you to pay off up to $20,000 per year on a $100 000 mortgage. It is important that the privilege payment also be flexible to allow you to pay smaller payments on the mortgage and as often as you wish. An extra $1000 periodically paid on a mortgage can help you become mortgage free faster.
When you require a mortgage for more than 75% of the purchase price of a property, that mortgage must be insured by Canada Mortgage and Housing (CMHC) or GE Mortgage insurance. The premium charged by these company`s decreases as the down payment increases. When you finance your property at 95%, a premium of 2.75% is added to the mortgage. By increasing the down payment to 10% of the purchase price the premium can be reduced to 2.5%. If you can put down 25%, you can avoid any additional insurance fee. Depending on your situation there are ways that you can structure this financing to avoid the CMHC or GE insurance premium.
As mentioned above, when you put a 25% down payment on your purchase you can avoid the CMHC premium. More importantly the larger the down payment, the lower the amount of interest you will pay over the life of your mortgage. It is important to note that it may not be wise to stretch yourself to increase your down payment and end up borrowing on credit cards or a line of credit at a higher rate.
The options for mortgages available can be very confusing for most mortgage shoppers. Terms for mortgages vary between variable and fixed rate, 6-month terms to 10 year terms. Taking a variable or floating rate mortgage can have savings. Typically the shorter the term or guarantee of the rate, the lower the rate will be. This does not always happen, depending on the market place and the economy, but history has shown that short-term rates tend to be lower than long-term rates. The up side of variable rate is the strong potential for interest rate savings. The down side is the fact that you are accepting the interest rate risk without a guarantee. If you are considering a variable rate mortgage you need to look at your own risk tolerance, and your cash flow available to deal with potential increased payment. Considering projections of rates and where we see interest rates heading can also be important in this decision. Make sure you talk to an expert when you are making this decision.
Housing Prices will Remain Strong in 2008
Existing home sales as measured by the Multiple
Listing service (MLS®) are expected to increase
during 2007 by 7.6% to approximately 519,722
units, surpassing the previous record level of
483,344 set in 2005. In 2008, MLS® sales are
expected to decrease by 3.9% to 499,650 units
reflecting moderating demand due to rising
mortgage carrying costs. Despite this forecasted
decline, MLS® sales in 2008 will be at their
second highest level on record. During 2009,
continuing moderation is expected with growth
falling by 2.3 per cent to 488,300 units.
The average MLS® house price is expected to
grow by 10.6% for 2007, to about $306,000 as
strong sales in Western Canada continue to put
pressure on prices. In 2008, existing home
markets will become more balanced and price
pressures will begin to ease. The average MLS®
price will increase by 5.2 per cent to about
$322,000 in 2008. Looking ahead to 2009, the
average MLS® price is forecast to increase by
3.8% to approximately $335,000. For more
information on this and your local market, please
visit www.cmhc.ca today!
*Seasonally adjusted annual rates
Source: CMHC April 8, 2008 News Release
Did you know.
That there is an uneven access to acceptable
housing across the household income spectrum?
Between 2002 and 2004, the 20 per cent of
Canadian urban households with the lowest
incomes were still facing serious difficulties in
finding acceptable housing. The incidence of core
housing need among low income households
remained steadily high with at least 56% of these
households unable to access acceptable
housing. The percentage of low-income
households among urban households in core
housing need increased from 77.7% in 2002 to
80.6% in 2004.
Source: 2007 Canadian Housing Observer
Key Partners Get the Upper Hand
One of the ways we give the Upper Hand to our
Key Partners and their clients is through Home
Buyers Seminars. Below, Rodney Shahbaz, Lisha
Dodsworth and Michael Medland stand beside a
marketing board at a Mississauga seminar for new
Seniors as a Growing Market Segment and
Housing Options available to Them
A well-known fact amongst the general Canadian
public is that seniors are a fast growing segment of
the population. Perhaps surprising about this
demographic is their potential as a player in your
local housing market. From 1991 to 2001, the
number of people aged 65+ in Canada increased
at more than double the rate of the general
population, with growth of this group expected to
keep accelerating up to and beyond 2011.
Although the incomes of seniors are lower than
those of the working-age households, many
seniors have substantial equity in their homes. In
2001, 71.2% of senior households owned their
homes (compared to 65.8% for all households).
With home equity and an average net worth over
$300,000, seniors are more and more exploring
different housing options and amenities available
to them. You can receive more valuable
information about this market segment and others
by referencing CMHC.s Canadian Housing
Canadian Mortgage Consumers Manage their Debt Responsibly
There are many convenient ways to pay off your mortgage sooner. The faster you pay off your
mortgage, the less money you.ll spend on interest. Here are some tips to help you get mortgage-free
• Make more frequent payments
• Make the largest payments you can afford
• Use your salary bonuses and tax refunds to pay down your principal
• Choose a shorter amortization period
• Keep your payments the same, even if interest rates drop
Increasing your mortgage payments by just 15% and switching to a bi-weekly payment schedule can
make a big difference to your mortgage term. Even if you start with a 40-year amortization period,
this strategy can help you be mortgage-free years ahead of schedule
Scotiabank Mortgage Payment Options:
15% + 15%® privileges - Pre-pay up to 15% of your original principal each year and increase your
scheduled monthly payment by up to 15%.
Match-a-Payment® option - Double your mortgage payment on any scheduled payment date
without fee or penalty.
Miss-a-Payment® option - Skip one or more payments without penalty, up to the amount of any
lump sum pre-payments or additional payments you.ve made, using the Match-a-Payment
Blend and Extend option - If you have a fixed rate mortgage, you have the option to blend your
existing interest rate with the current rate and extend to a term of your choosing.
Portability option - Take your Scotiabank mortgage with you if you move to a new home, at the
same interest rate for the remainder of its term.
Rate Blending option - Combine the mortgage on your current home with additional financing for
your new home at a blended interest rate. No interest penalty or administration fees will be
How your clients can pay off their mortgage - faster!
Canada Mortgage and Housing Corporation.s (CMHC)
2007 Mortgage Consumer Survey shows that 78 per
cent of Canadians who recently purchased a new home
intend to pay off their mortgage as quickly as possible,
and many have already taken steps toward that goal.
.This study confirms that Canadians remain
fundamentally cautious when it comes to their mortgage
debt,. said Pierre Serré, Vice-President, Insurance
Products and Development, CMHC. .The fact that new
homeowners are working to pay down principal early
and are accelerating payments is a good indication that
this responsible behaviour will continue throughout the
life of their mortgage..
The 2007 survey focused primarily on recent purchasers
and also for the first time included questions on
homeowner behaviour regarding mortgage debt repayment
since arranging their mortgage. More than half
of recent purchasers agreed that, whenever possible, they
would use extra money to pay down the principal on their
mortgage. CMHC.s survey revealed recent purchasers are
acting on these intentions, with one-third at some point
having made a lump sum payment to their mortgage. Also,
well over half reported making weekly or biweekly
payments, and the majority of these (84 per cent) are
being made on an accelerated basis, which has the effect
of shortening the original amortization period.
CMHC.s survey also indicates that Canadians continue to
be well served by the mortgage industry, with 85 per cent
of respondents expressing satisfaction with the mortgage
process. Eighty-four per cent felt they had access to
suitable housing options, 88 per cent felt confident they
could manage their debt, and 89 per cent of recent
purchasers felt that the mortgage choice they made was
the best option for them.