With all the rate hikes across the board over the last few months to combat rising inflation, holding onto, or applying for a mortgage has become challenging. That is why it is essential to know some savings tips that can help ease the sting.

Your mortgage rate is affected by many factors, especially if you are locked into a variable rate right now. The benchmark rate is what lenders base their prime rate on. All of the Bank of Canada’s prime hikes over the last year has caused a ripple effect on mortgage rates Canada-wide.

Personal factors also come into play that determines your mortgage rate. These factors include credit scores, debt-to-income ratios, income and employment, the size of your downpayment, and your home equity. 

With this in mind, let’s look at how you can save on your mortgage.

More Payments

You can make multiple payments a month if you wish. Splitting up your payments to twice a month, or bi-weekly helps you save on interest expenses. Bi-weekly payments reduce your amortization period, which also helps you pay off your mortgage faster. The more mortgage you can pay off in a calendar year will lower your interest payments down the line.

Avoid Penalties

Breaking a mortgage before maturity can come with several fees and penalties that may be stiff on your wallet. In Canada, the average fee for breaking a mortgage early is to pay three months of interest on a variable/adjustable rate mortgage. For fixed-rate mortgages, the fee is whatever is greater between interest rate differential or three months of interest payments.

However, you may be able to skirt around the penalties and not pay them at all. If your mortgage allows you, you can port it. Porting your mortgage transfers your old loan to a new home. And, if you need a new mortgage, you may be able to combine it. Thus, you don’t break the existing mortgage.

Secondly, you can look at assumable mortgages. This is when a lender allows you to give your mortgage to a pre-qualified low-risk buyer. This is not always offered, so check with your personal broker/lender.

Pre-Payments and Other Offers

Some mortgage lenders provide encouragement to pre-pay a certain amount of your principal. This helps you pay off your principal faster which lowers your overall interest payments. Sometimes, by adding in a no pre-payment agreement, a lender may offer other incentives such as lower interest rates. If you’d like to make pre-payments, speak with your broker or lender about what is allowed on your mortgage or what privileges you can take advantage of.

Ultimately, the best way to save on your mortgage is to work with a qualified broker that can find you the best mortgage plan for you. A broker shops around on your behalf to find the lender that will offer the best terms, rates, and privileges for your situation. Working with a mortgage broker near you can often lead to cheaper mortgages through their relationships and ability to negotiate. The Mills Team is an award-winning brokerage with years of industry experience. Our expertise, insight and network will connect you to the best possible mortgage products. Contact us for a free consultation today.