How To Avoid Extra Costs On Your Mortgage
May 18th, 2010 Posted in Mortgage
Extra Costs Can Drain Your Funds
The number one priority expenditure for most families in Canada and further afield is a place to live. There are other things that need to be addressed as a matter of importance, too, and it is not limited to the family home. But without the family home, nothing else really matters. If you don’t have a home to keep you warm, safe and comfortable, then you can have as many cars as you like – none of them will be as satisfactory and as central to your life as your home. Taking your mortgage seriously is therefore an essential matter. As much as you may want to cut loose a little bit when the monthly pay check comes in, it is important to remember that some figures need subtracting before the fun can begin.
The monthly mortgage payment is the first number most people will subtract from their paycheque they are making their month ahead calculations. It is one payment that cannot be missed and should not be compromised. If the situation you find yourself in precludes making a full payment to the mortgage, it is essential to call the lender and seeing if you can work out a payment holiday or, if necessary, a restructuring of the loan. Not bothering to keep the bank aware of how the situation is progressing will only see you receiving angry letters, late payment fees and, eventually, being at risk of losing your house. If you have any way of avoiding it, you should make sure that you do not miss payments – even if it means making reduced payments on other lines of credit. This loan is secured on your home.
Avoiding extra costs on your mortgage is partly a matter of common sense and partly a matter of being able to see where problems will occur before they really begin to cause concern. Seeing a debt advisor to talk through your options and make out a financial management plan is one way in which you may even be able to avoid making reduced payments to the highest of all high priority debts.
Strangely, though, there are some loans (mortgages included) that add on extra fees not only for the late payment or partial payment (or even non-payment) of the monthly debt repayment, but will charge you an early payment surcharge if you pay the loan off in full ahead of time. If this is something you can see yourself doing, then it is worth asking the bank if they have such a policy. Look through the terms and conditions on your loan agreement as well, to see if there are any strange circumstances in which they will add fees to the balance of your mortgage. The less you have to pay on a mortgage, the more money you will have to truly enjoy. For this reason it makes sense to avoid any unnecessary and stupid expense and to find ways of cutting off problems before they can cost you money.
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2 Responses to “How To Avoid Extra Costs On Your Mortgage”
By ScottyMortgages on May 19, 2010
It is all about the options that go along with the mortgage you select. Some mortgages allow for a missed payment. No frills low rate mortgages can be ok if you are sure you are not going to move and plan on making payments till term but getting out of them can be very costly.
By Toronto Bankruptcy Trustee on May 22, 2010
This is a good article, but it should also mention that a significant cost in obtaining a mortgage in Canada is the CMHC insurance premium if the purchaser’s down payment is less than 20%. This premium amount is added to the mortgage and amortized over the term of the mortgage.
During the crazy days of the real estate boom prior to September 2008, it was possible to purchase a home with 0% down payment, but the CMHC premium would be 3.10% of the mortgage amount borrowed. This is a significant cost.
If the buyer cannot afford the 20% down payment, they should try to borrow from family if possible and pay them a reasonable rate of interest. They can also provide the family member with a charge over the property to secure the loan. It’s simply better to pay the family member a fair rate of return and keep the money in the family than forking over thousands of dollars to CMHC.
Hope this comment is helpful….