Thinking of buying or selling a home? In
this video, I will share with you three of the nine steps in finding out
the right mortgage for you. Coming right up Hi my name is Lei Villar-Cisneros, your
real estate go-to resource in the Greater Toronto Area where i help
families like yours, achieve your home ownership goal. Now we are on the second series of the three-part video series
about choosing the right mortgage. Let's get to
it. Number four, fixed or variable mortgage?
When you are on a budget and this is your first time to have a mortgage,
it is advisable that you choose a fixed mortgage
so that your payment will be the same from
day one after the end of your term.
This way, whatever happens to the market
whether the rate goes up or down, you are assured
that you would be able to do your budget. Now, variable is for those
people that have more equity in their house and
they are not afraid to gamble
with regards to the interest rate fluctuation.
Variable mortgage rides with the prime so every week the Bank of Canada
decides what that number is and if it changes,
then you have to adjust your monthly paymen. To learn more about fixed and
variable mortgages, check out my other video
entitled fixed or variable mortgages Now we'll go to number five and that is
that frequency of payment.
Did you know that by just
changing your frequency payment you can save up to seven years on the
amortization of your mortgage and that is a lot of money. And how do you do it?
there are six type of payment frequency that you could
choose from and they are monthly payment, bi-weekly
weekly, semi-monthly and there is another modification that they call
accelerated bi-weekly and accelerated weekly.
The accelerated weekly and accelerated bi-weekly have pretty much
the same interest savings. Because you always pay for the interest first,
if you chose a monthly mortgage payment, that means you have to pay a one-month
interest first before you pay for your principal.
Now, if you split that into two, that means that you will only pay
for two weeks interest, similarly, if you split that into weekly payments,
you will only pay one week of interest before principal is
paid for that same amount.
If you choose an
accelerated bi-weekly, this only means that you will be paying every
two weeks. Because we have 26 payment weeks in a year the
last two bi-weekly payment that you will pay will
go towards your principal so that last two weeks will
not get any interest payment. So if you keep on doing
that you will strip up seven years out of your mortgage amortization. By
simply dividing a monthly payment into two, let's say if you have a
mortgage payment of two thousand, split that into two that's a thousand, so
you pay a thousand every two weeks, you're already shaving
off interest and putting more money towards
So that's a tip that you have
to remember when you have your mortgage. Number six,
do you go standard or collateral mortgage?
A standard mortgage is basically, let's say for example you have a 400 000
mortgage on a $500 000 house so the bank will register
$400 000 loan on a standard mortgage but on a collateral mortgage they will
register up to 125 of your home value, so that means that
even if you did not exercise getting an extra
line of credit or credit cards with your mortgage,
whenever you renew it, you have to de-register that payment, so that
means that whenever you switch mortgage to another lender, that a lawyer
or a legal team needs to de-register that mortgage, so you will pay for
a lawyer's fee and that's gonna be like about
a thousand dollars, but the advantage of having a collateral mortgage, however,
is if you are getting a line of credit, credit cards then they don't have to
check with you because they already have a collateral,
which is your house.
There is an advantage to a
collateral over the standard and vice versa. To learn more about
buying, selling or financing a home, check out my other videos and if you
have not subscribed yet, do it right now and don't forget to hit
that bell so that you will be notified when a
new video is uploaded. Check out my next video for
the third and final installment in the three-part series of nine step
in choosing the right mortgage. Thank you so much for watching and I'll see you on
the next one. Bye for now don't forget to share!