30 Oct

5 SIMPLE STEPS TO OWNING YOUR OWN HOME

DOWN PAYMENT

Posted by: Paula & Al Roberts

Often, the route to owning your own home can seem like a trip to the moon and back. Really though, it comes down to five key steps:

1 – Manage your credit wisely.
If there is one thing that will gum up the purchase of that perfect home, it’s an unwise purchase or extra credit obtained. Keep your credit spending to a minimum at all times, make every payment on time and most of all pay more than the minimum payment. Remember that if you just make the minimum payment on your credit cards, chances are you will still be making payments 100 years from now.

2- Assemble a down payment.
At first glance, the challenge of finding a down payment can seem insurmountable. In fact, you just need to consider all the sources for down payment funds. yes, you will have saved some but remember you can also, in some situations, use RRSP funds, grants ( BC Home Equity Partnership for example ) and non traditional sources like insurance settlements, severance and of course, gifted funds from a family member. Don’t forget that you’ll need to demonstrate that you’ve had the funds on deposit for up to 90 days and also that you have an additional one and a half percent of the mortgage amount for closing costs.

3- Figure out how much you can afford.
It’s at this point that most people usually stop and scratch their heads. Some even try and tough it out, using the raft of online calculators to figure it out, but new mortgage rules can make even that a challenge.
If you talk to a Dominion Lending Centres mortgage specialist ( like me! ) though, they can help you figure it out and even go as far as getting you a “pre-approval” from a financial institution. This can give you the confidence you need to actually start looking around. Read More

27 Oct

PAYMENT FREQUENCY, DOES IT REALLY MAKE A DIFFERENCE ?

Mortgage Tips

Posted by: Paula & Al Roberts

It has been said that there are two certainties in life; death and taxes. Well, as it relates to your mortgage, the single certainty is that you will pay back what you borrowed, plus interest. However, how you make your mortgage payments, the payment frequency, is somewhat up to you! The following is a look at the different types of payment frequencies and how they will impact you and your bottom line.

Here are the six main payment frequency types:

  1. Monthly payments – 12 payments per year
  2. Semi-Monthly payments – 24 payments per year
  3. Bi-weekly payments – 26 payments per year
  4. Weekly payments – 52 payments per year
  5. Accelerated bi-weekly payments – 26 payments per year
  6. Accelerated weekly payments – 52 payments per year

Options one through four are designed to match your payment frequency with your employer. So if you get paid monthly, it makes sense to arrange your mortgage payments to come out a few days after payday. If you’re paid every second Friday, it might make sense to have your mortgage payments match your payday! These are lifestyle choices, and will of course pay down your mortgage as agreed in your mortgage contract, and will run the full length of your amortization.
However, options five and six have that word accelerated attached… and they do just that, they accelerate how fast you are able to pay down your mortgage. Here’s how that works.
With the accelerated bi-weekly payment frequency, you make 26 payments in the year, but instead of making the total annual payment divided by 26 payments, you divide the total annual payment by 24 payments (as if the payments were being set as semi-monthly) and you make 26 payments at the higher amount.

So let’s say your monthly payment is $2,000.
Bi-weekly payment : $2,000 x 12 / 26 = $923.07
Accelerated bi-weekly payment $2,000 x 12 / 24 = $1,000

You see, by making the accelerated bi-weekly payments, it’s like you’re actually making two extra payments each year. It’s these extra payments that add up and reduce your mortgage principal, which then saves you interest on the total life of your mortgage. Read More