Of Prime: Plenty of choice to get the right mortgage

Kelowna mortgage experts weekly column

Of Prime Interest column

Of Prime Interest column

When purchasing a new home or refinancing or renewing your existing mortgage it is important to choose the right mortgage for you.

Lenders will differ in certain terms and conditions in their mortgages. Things you should look for to fit your goals going forward:

• Am I allowed to pay off a certain percentage of the mortgage without penalty? Lenders will allow you to do so once each year, some on the anniversary date and others once at anytime throughout the year. Depending on the lender you may pay 10 to 20 per cent of the original mortgage amount.

• Am I allowed to increase my payments? The majority of lenders allow you to increase your payments once each year by 10 to 20 per cent of your original payment amount with some lenders allowing up to double the amount of your original payment. Some lenders will allow you to double up on payments.

• Are monthly payments my only option? The answer is definitely no. Payment options available with most lenders are monthly, weekly, bi-weekly, accelerated bi-weekly and semi monthly. Some of these options will significantly reduce the amount of interest you pay over the life of the mortgage and as a result reduce your principal balance more rapidly. Be sure and have the options explained to you and choose what best suits your budget.

• If I sell my existing home and purchase another one do I have to pay a penalty on a closed mortgage? Most mortgages today are portable. In the event of a sale and new purchase the lender will charge a penalty on the existing mortgage and depending on the lender will allow from one to six months for you to purchase a new home. The penalty will then be refunded to you.

• What happens if I purchase a new home and require more money? You can “port” the existing mortgage to the new property at your existing rate. Ported mortgage balance is $300,000 with an interest rate of 2.79 per cent and you require an additional $50,000. If the rate on the new funds is 3.29 per cent, this rate will be blended with your 2.79 per cent existing rate and you will end up with a blended rate comprised of 50,000.00 at 3.29 per cent and 300,000.00 at 2.79 per cent. If you are reducing your mortgage by $50,000 you will pay a penalty on that amount only.

• Do all lenders calculate and charge the same penalties if I pay off my mortgage prior to the term being complete? Not all lenders calculate their penalties the same. The major financial institutions and credit unions have a higher posted rate and an interest rate differential penalty can be much higher than that with a mono lender. Be aware of how your lender calculates their penalty as the difference can be very costly.

• Can my mortgage be assumed? A potential purchaser can take over your existing mortgage terms as long as they qualify for the assumption and your lender allows for assumptions. This will avoid a penalty for you.

These are a few things you should look for to ensure your mortgage is right for you. A mortgage broker has access to several lenders and can clearly outline how different terms of a mortgage can impact you.

Of Prime Interest is a collaboration of mortgage professionals Trish Balaberde: 250-470-8324 or trishb@creativemortgage.ca; Darwyn Sloat: 250-718-4117 or dsloat@creativemortgage.ca; Christine Hawkins: 250-826-2001 or christine@creativemortgage.ca.

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