Mortgage payments:
What are some common ways you can make mortgage payments? What do amortization periods mean for homeowners?
You can make payments monthly, accelerated biweekly, semi-monthly or weekly. It’s important to protect yourself for things out of your control. When we set up a mortgage for any client, we always set them up with the minimum monthly payment and the longest amortization for their situation. Then they can use their pre-payment privileges to increase the payments and pay off their mortgage in as little as 5 years! This is far better then handcuffing them to something which will cost them more down the road.
Then if something happens and they don’t have cash aside for an emergency they don’t have to get in debt with credit cards or lines of credit that will cost them more in the long run. If they started with a higher payment and short amortization if anything happens, they’re in a difficult spot.
A mortgage is a one-way street and it costs money to break it if needed.
What should first-time homeowners know about mortgage payments that could protect them as borrowers?
If you shop for a mortgage on your own, your credit can be negatively impacted. Lenders may flag your file if they think you are modifying your application and you won’t qualify for their new client specials that may be available at a later date. It’s best to always consult with a mortgage professional first to thoroughly understand your options.
Is there a “best choice” for the length of time you hold a mortgage?
If you are thinking of buying a home, you should see what you qualify for right away. If you are self employed, you should look into qualifying up to 2 years in advance so you can see what income you should have and evaluate any money you’ll need to take out of your company for a down payment. The sooner you know your options the sooner you’ll know if there’s something reporting incorrectly on your credit report or that you need to focus on paying off outside debt. This will ensure you are positioned in the best way possible when you do find a home. When you buy is up to you but positioning yourself best starts as soon as you have the thoughts of becoming a homeowner.
If you are getting a “real” pre-approval in place you should expect to submit an application, sign a credit consent agreement, letter of engagement, and supply income and down payment supporting documentation. Some people will have this on hand while some people may need to ask their Human Resources department or accountant and download the appropriate statements etc. Once it’s been submitted to your mortgage professional in its entirety it will generally take a full business day to review a straight-forward file.
Should homeowners try to pay off their mortgage early?
It’s all about balance and looking at everything going on. If they can afford it, we have a strategy that we implement called the inflation hedge – they make small increases throughout having the mortgage that will protect them from future payment shock but not leave them cash poor. It’s a well balanced approach. Each strategy is customized based on the profile of the borrower and personal capacity to protect equity, build wealth and avoid accumulating outside debt.
Angela Calla is a 16 year award-winning woman of influence mortgage expert. Alongside her team, passionately assisting mortgage holders get the best mortgage, and educating them on The Mortgage Show on CKNW for over a decade and through her best-selling book The Mortgage Code available on Amazon. To purchase the book click here: The Mortgage Code. Proceeds from all sales will be donated to Access Youth Outreach Services. Angela can be reached at callateam@dominionlending.ca or 604-802-3983.
