In our last blog post, we discussed some points to consider about mortgage renewal. We briefly touched on the fact that the mortgage terms might change for your mortgage even if you remain with the same company. For that reason, you should make sure that you think about various aspects of the new terms to ensure that they fit in with your finances.
One very important aspect of your mortgage is the interest rate. Many people have gotten accustomed to the lower interests rates that have been commonplace in the recent years. When it comes time to renew your mortgage or if you are just now seeking a first mortgage, you should learn how the interest rate can affect your payments. A higher interest rate means that it will take you longer to pay off a mortgage if you don't make higher payments.
Another important aspect of the mortgage is the total amount of the mortgage. Many people focus on how big of a mortgage they can afford. That isn't the smartest thing to do. Instead, you should think about how big of a house payment you can comfortably make each month. Ideally, your mortgage payment won't exceed 32 per cent of your gross income each month.
You might also consider paying off your mortgage faster than the actual term. There are several ways you can do this. One of those ways is to use an accelerated bi-weekly payment instead of a standard bi-week payment.
No matter what you are considering, you should ensure that the mortgage is legally valid. Having it reviewed can let you know if there is anything amiss.
Source: Canada Mortgage and Housing Corporation, "Mortgage Planning Tips," accessed Sep. 06, 2015
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