Dominion Lending Centres: 5 Questions Mortgage Borrowers Should Ask But Often Don’t

1. If I have mortgage default insurance do I also need mortgage life insurance?
Yes. Mortgage life insurance is a life insurance policy on a homeowner, which will allow your family or dependants to pay off the mortgage on the home should something tragic happen to you. Mortgage default insurance is something lenders require you to purchase to cover their own assets if you have less than a 20 per cent down payment. Mortgage life insurance is meant to protect the family of a homeowner and not the mortgage lender.

2. What steps can I take to maximize my mortgage payments and own my home sooner?
There are many ways to pay down your mortgage sooner that could save you thousands of dollars in interest payments throughout the term of your mortgage. Most mortgage products, for instance, include prepayment privileges that enable you to pay up to 20 per cent of the principal (the true value of your mortgage minus the interest payments) per calendar year. This will also help reduce your amortization period (the length of your mortgage). Another way to reduce the time it takes to pay off your mortgage involves changing the way you make your payments by opting for accelerated biweekly mortgage payments, which will not only help you pay off your mortgage more quickly but will also save you a significant amount of money over the term of your mortgage. Visit me to find out which strategy suits your specific needs.

3. What mortgage term is best for me?
Selecting the mortgage term that’s right for you can be a challenging proposition for even the savviest of homebuyers. If paying your mortgage each month places you close to the financial edge of your comfort zone, you may want to opt for a longer mortgage term, such as 5 or 10 years, so that you can ensure that you’ll be able to afford your mortgage payments should interest rates increase. By the end of a 5- or 10-year mortgage term, most buyers are in a better financial situation, have a lower outstanding principal balance and, should interest rates have risen throughout the course of your term, you’ll be able to afford higher mortgage payments.

4. If I want to move before my mortgage term is up, what are my options?
The answer to this question often depends on your specific lender and what type of mortgage you have. While fixed mortgages are often portable, variable mortgages are not. Some lenders allow you to port your mortgage, but your sale and purchase have to happen on the same day, while others offer extended periods. As long as there’s not too much time between the sale of your existing home and the purchase of the new home, as a rule of thumb most lenders will allow you to port the mortgage. In other words, you keep your existing mortgage and add the extra funds you need to buy the new house on top of it. The interest rate is a blend between your existing mortgage rate and the current rate at the time you require the extra money.

5. How do I ensure I get the best mortgage product and rate upon renewal at the end of my term?
The best way to ensure you receive the best mortgage product and rate at renewal is to enlist your mortgage broker once again to get the lenders competing for your business just like they did when you negotiated your last mortgage. A lot can change over a single mortgage term, and you can miss out on a lot of savings and options if you simply sign a renewal with your existing lender without consulting your mortgage broker.

www.cristinapiccirillo.ca

Visit Cristina Piccirillo at Dominion Lending Centres’ new location:
281 Woodbridge Ave., Unit 28, Woodbridge, Ont.
905.605.5363 / cpiccirillo@dominionlending.ca