Five Tips to Slash your Mortgage Costs

It’s no wonder that the majority of homeowners dream of one day being able to pay off their mortgage and live a life free from the shackles of interest rates, home finance and worries about meeting the monthly mortgage payments. The largest expense the majority of us take on in a lifetime is our mortgage and each month our home finance payments take a substantial chunk out of our take home pay.

Just think what you could do with all the extra money you would have spare if you didn’t have to meet your mortgage each month! Interested? Well, here are five steps that you could take today to substantially slash your mortgage repayments and the overall cost of your home loan and even speed up your rate of repayment so that the day when you’ve paid off your home comes that much sooner.

Step One - Demand Better Service.

As a loyal customer of your mortgage lender isn’t it about time you were rewarded for your financial commitment, for making your regular payments and for being a good, long term customer?

Well, you can be certain your mortgage lender will not reward you unless you ask for a better deal on your mortgage!

So get on the phone, call up your lender, ask to speak to someone in customer services or the customer retention department and explain that you’re looking around for a better mortgage deal. Often they will offer you a blended rate for the balance of your term.

We recently had a client who was in a 5 year fixed term at 5.35%. She called her bank and was told that the early withdrawal penalty for her $130,000 was $1700. That’s a lot of money and she was discouraged. However, we ran a rate comparison analysis and found that she would save $3400. by switching her mortgage now. She saved $1700. using only one of our steps.

Did you know, 20% of bank customers will sign their mortgage renewal letter without bothering to check rates? The banks count on this 20% to pad their profits so that they can give discounts to borrowers who ask for it. Often all it takes is one request and you will get a lower rate.

Step Two - Shop Around.

If step one doesn’t get you the deal you deserve, shop around. Check the internet and newspapers for special offers from lenders. Be sure to read the small print! A number of lenders offer 1.99% rates for 3 -6 months but the rate rises for the balance of the term. You will have to add the two rates together and find out what the blended rate will be.

Step Three - Get Help.

Get expert assistance in the form of a licensed and independent mortgage professional. As independent brokers they have access to and understanding of every single mortgage product available and they should be best placed to assist you find a better deal than the one you have now. A deal where your repayments will be less, your interest rate will be lower and the amount you repay over the entire duration of your loan is reduced.

Make sure your broker is fee free and remunerated by any company you decide to take a mortgage out with. More importantly than this, make sure they are regulated and licensed correctly. If possible ask for professional references or testimonials.

Step Four - Cut Out All Extras.

Mortgage lenders are notorious for offering mortgage, income disruption and life insurance at high rates. The lenders make huge margins on these products. While they are of value, couldn’t you find them at a cheaper rate elsewhere? Ask your mortgage broker for a financial advisor who could offer you insurance at a better rate. You could literally save yourself thousands of dollars each year in insurance premiums!

Step Five - Pay It Down.

So, you’ve cut your interest rate down to size, reduced your monthly payments, and saved yourself thousands on insurance products - now turn all those savings back into your mortgage and repay early. Leave your monthly payments at the amount you paid before and you can shave years off your mortgage. Make sure that your new lender offers pre-payments without penalties. Many of the lenders allow you to increase your payments by 15% per month and to pay up to 15% of the original mortgage amount. Some lenders will let you double up your payment amounts.

If you follow the 5 steps above you will be able to achieve your financial goals faster and easier than you thought possible.

David is a Calgary resident and a mortgage consultant. You can contact David at 403-836-1201 or visit www.mortgagealliance.ca/davidcooke