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MORTGAGE 101 

While there are a variety of different mortgage products available on the market today, the basics remain the same. All mortgage loans are comprised of two parts:

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Principal Sum – Every month, a portion of your mortgage payment goes towards your principal sum, or the total amount owed.

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Interest – The additional cost associated with borrowing from the lender, in which the rate can vary while having a direct impact on our monthly payment.

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Of course, the sooner you pay down your interest, the sooner you’ll be able to tackle your mortgage principal (and pay off your mortgage faster). Fortunately, there are a few strategies you can execute to help you with this. These include:

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Saving a larger down payment – The more you put down, the smaller your mortgage loan and associated interest payments.

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A shorter amortization period – Repaying your loan over a shorter period of time will see higher monthly payments but lower total interest costs.

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Weekly or bi-weekly payments Expediting your payment schedule allows you to make an additional payment(s) towards your principal annually.

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Additional lump-sum payments – Many lenders will allow you to make lump-sum payments, in which you can make a larger than average payment (up to 20% of the remaining balance) towards your mortgage, once a year.

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Keep in mind, you’re not obligated to sign on the dotted line with your bank. Nor are you stuck with the same product for the entire life of your loan. At the end of each term, you will have the opportunity to revisit your loan options and adjust the conditions to best suit your current needs – this includes interest rates, payment schedules, term length and even your lender. Just be sure to talk to your broker before you decide to renew.

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