The Canadian mortgage rules and the way rates are calculated by lenders very much changed starting in 2016. Quoting an accurate rate is no longer a simple endeavour; a lot of lenders have minimum credit requirements attached to their rates, unique guidelines, and the rates also depend your down payment and the program you need.
Many lenders and brokers will try to entice you with a low rate online only to have you find out later that the rate you saw is for another program or for a different term; and/or you will be talked out of it once they have your application and/or it's a mortgage with strings attached.
While I could do what many others are - post the lowest possible rate (no matter the terms) just to "get you" to apply - I choose to provide advice based service so that when I quote you a rate it’s the BEST RATE coupled with the BEST MORTGAGE AND LENDER for YOU.
Could you imagine walking in to an Investment Advisor and before you say 2 words they recommend an investment? Well, our homes and mortgages are typically our largest asset and debt, you need a professional.
Feel free to print this PDF which reviews some of the main differences between mortgage types.
How often are Mortgage payments made?
Monthly, Semi-Monthly, Bi-Weekly or Weekly. Bi-weekly and weekly payments may also be offered as either accelerated or non-accelerated payments.
The difference between accelerated and non-accelerated is in how many of your payments will go to principal and interest and how many will go directly onto your principal.
Example - Accelerated Weekly
52 payments in a year:
48 go to the principal and interest
4 go directly to the principal
If it was non-accelerated then all 52 weekly payments would go to principal and interest.
Those principal only payments save you interest costs and in turn also reduces your overall amortization. Accelerated payments are an effective way to pay down your mortgage quicker.
Which option is best?
Accelerated weekly payments are the most advantageous BUT not by a lot over accelerated bi-weekly:
For example a $300,000 mortgage, 4% interest, 5yr term, 25year amortization. The accelerated weekly payments save $43.27 over a 5yr term in interest over bi-weekly.
What payment schedule should I choose?
Normally clients find it easiest to align their payments to their pay schedule. So if you are paid bi-weekly, its normally easier to pay bi-weekly and budget accordingly. But if a client is paid monthly, and wants bi-weekly payments then they need to always budget for 2 months a year where they will have an extra bi-weekly payment.
What are the payment differences?
For example a $300,000 mortgage, 4% interest, 5yr term, 25year amortization. Payments would be: