9 Steps to Buying A Home - Buyer's Guide

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money saving strategies One of the best ways to save money is to pay off your mortgage faster, as this will lower your interest charges. It all starts with understanding how your payment is applied to the principal and interest you owe, and the options your mortgage lender can offer you. Understanding principal versus interest For each mortgage payment you make, the money is first used to pay the interest on your mortgage loan. The remaining portion of your payment is then used to reduce the principal, which is the amount that you borrowed from the lender. In the first years of the mortgage, most of the payment normally goes toward the interest costs. As a result, the principal, or the amount that you owe, may decrease by only a small amount. As the mortgage balance decreases over time, more of each payment goes toward paying off the principal. During a 25 year mortgage, depending on the interest rates charged on your mortgage, the total amount of your payments could be double the principal amount that you originally borrowed, or even more. The key to saving money on your mortgage is to pay off the principal as fast as possible. If your household budget allows you to reduce the time you need to pay your mortgage in full, you could save thousands, or even tens of thousands of dollars in interest charges. Below are 4 ways to pay off your mortgage faster: 1. Accelerate your mortgage payments By simply splitting your monthly mortgage payment into two equal bi-weekly payments, you can easily save on interest costs. This is because you end up paying 26 bi-weekly payments or 13 monthly payments within one year rather than 12 monthly payments. The example below shows your cost savings based on a mortgage amount of $200,000. STANDARD MORTGAGE PAYMENTS ACCELERATED BI-WEEKLY PAYMENTS Mortgage $200,000 $200,000 Interest Rate 4.5% 4.5% Payments $1,106.95/month $553.48/2 weeks Interest Cost $132,082.75 $111,320.64 Actual Mortgage Length 25 years 21 years 7 months Savings in Interest $20,762.11 Savings in Time 3 years 5 months The above information and calculations are based on sample data only. Please contact your VERICO Mortgage Professional for more information. Monika Tarnik-Jedrusiak 416.822.7357 ext. Lic# M13000687 monika@mortgagepal.ca 34
2. Monthly Prepayments By making extra monthly pre-payments you can pay your mortgage off much sooner and save thousands of dollars in interest costs. The example below shows your cost savings based on a mortgage amount of $200,000 and an extra monthly payment of $100. STANDARD MONTHLY PAYMENTS ADDITIONAL MONTHLY PAYMENT Mortgage $200,000 $200,000 Interest Rate 4.5% 4.5% Monthly Payment $1,106.95 $1,206.95 Extra Monthly Payment $0 $100 Interest Cost $132,082.75 $111,210.02 Actual Mortgage Length 25 years 21 years 6 months Savings in Interest $20,872.73 Savings in Time 3 years 6 months 3. Annual Lump Sum Payments By making extra annual lump sum payments you also can pay your mortgage off much sooner and save thousands of dollars in interest costs. The example below shows your cost savings based on a mortgage amount of $200,000 and an extra annual lump sum payment of $1000. STANDARD MORTGAGE PAYMENTS ANNUAL LUMP SUM PAYMENTS Mortgage $200,000 $200,000 Interest Rate 4.5% 4.5% Monthly Payment $1,106.95 $1,106.95 Extra Annual Payment $0 $1000 Interest Cost $132,082.75 $113,428.35 Actual Mortgage Length 25 years 22 years Savings in Interest $18,654.40 Savings in Time 3 years The above information and calculations are based on sample data only. Please contact your VERICO Mortgage Professional for more information. ® 35
Page 1 and 2: HOMEBUYER'S GUIDE Revised July 2017
Page 3 and 4: What to expect from this guide This
Page 5 and 6: Section 1. Qualification Guidelines
Page 7 and 8: down payment Down payment A down pa
Page 9 and 10: Gross debt service ratio and total
Page 11 and 12: Section 2. Credit Credit is a criti
Page 13 and 14: What is a credit bureau? A credit b
Page 15 and 16: 2. Calculate your monthly debt paym
Page 17 and 18: Home Buyers’ Plan The Home Buyers
Page 19 and 20: Section 3. The Approval Process Onc
Page 21 and 22: the approval process 7. Once we hav
Page 23 and 24: Why use me as your mortgage profess
Page 25 and 26: Section 4. Mortgages and Insurance
Page 27 and 28: mortgage interest rates When you ap
Page 29 and 30: Example Most lenders allow several
Page 31 and 32: other costs to consider Mortgage Li
Page 33 and 34: Section 5. Now That You’re a Home
Page 35 and 36: home insurance As home ownership is
Page 37: Section 6. How to Save The key to s
Page 41 and 42: 5. Renewing with a Mortgage Profess
Page 43 and 44: Section 7. Resources Monika Tarnik-
Page 45 and 46: Term Conventional Mortgage Countero
Page 47 and 48: Term New Home Warranty Program Nota
Page 49 and 50: Homebuyer’s Guide at a glance Sec

9 Steps to Buying A Home - Buyer's Guide

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