Mortgage Smarts Can Save You Money

Mortgage "smarts" can save you money

If you are shopping for a house, you may have heard of some new mortgage products on the market, with amortization periods of up to 30, 35 and 40 years. While they can mean an attractive smaller monthly payment, you should be aware of the potential consequences - such as the amount of interest you would have to pay, over the years.

Do the math and know your options before signing a mortgage contract

The Financial Consumer Agency of Canada (FCAC) recently released an update to its suite of on-line mortgage tools. FCAC's mortgage qualifier calculator and mortgage payment calculator are designed to help consumers determine, first, if they qualify for a mortgage - given their current income level and debt load - and then how to calculate their optimum schedule of payments. FCAC's mortgage calculator can show you how many years and how much money you can save by making pre-payments on your mortgage.

These tools, together with the Agency's FCAC's on-line mortgage quiz and its publication The ABC's of Mortgages, can help you better understand your rights and responsibilities as a consumer, as well as the terms and conditions associated with the different mortgage products that are available.

Despite knowing the extra costs involved, you may still have a good reason to opt for a 30- or 40-year mortgage product. A longer amortization period may be the only way you can afford a house in today's expensive housing market.

However, if you are thinking about a long-term mortgage, you should consider making accelerated bi-weekly payments. By doing so, you can save tens or even hundreds of thousands of dollars in interest over the years. Even adding an extra ten dollars to each mortgage payment can reduce the amount of interest you pay over the life of the mortgage by thousands of dollars.

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You can find more information on mortgages by consulting FCAC's Frequently Asked Questions (FAQ) database, which contains answers to a number of mortgage-related questions - from penalty calculations, to insurance products, to interest rates. To view the Frequently Asked Questions, visit the Agency's Web site at: www.fcac.gc.ca and go to the "For Consumers" section.

To obtain a free copy of The ABC's of Mortgages, call FCAC, toll-free, at: 1-866-461-3222.

FCAC is a Canadian federal government agency that protects consumers' rights and provides them with information about the financial products and services.

Source: www.newscanada.com

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