Finding a low mortgage rate is the obvious way to save money when it comes to the interest on your home loan, but if you are looking for additional savings, a great rate is only the beginning. You work hard for your money, and doing a little bit of extra homework when getting a mortgage can make a big difference. It doesn’t matter whether you’re crunching the numbers on your first, second or refinancing your mortgage, knowing how to save on interest means more money in your pocket. It takes a lot less time and is easier than other ways to save money---and requires no coupon cutting!---so it’s not a bad idea to sit down with your mortgage broker and see how you can structure your payments to keep more of your hard-earned money right where it belongs.
When we work with our clients, we help them understand all their options and what this means for the interest they will be paying the lender. There are many ways to pay less interest, but here are some of the top options:
Increase Your Down Payment
This is obviously not an option for everyone, but if there’s a way that you can increase your down payment, know that while that’s more money up front, you’ll be saving a lot of money over the lifetime of your mortgage amortization period. There are many creative ways to come up with a bigger down payment, and we’ve seen our clients squirrel away extra cash doing anything from living with the parents for a few extra months or skipping the annual vacation getaway or daily Starbucks. You could also request a gift from a family member or, if you are a first-time home buyer, look into the Canadian Government’s Home Buyers’ Plan, which allows you to allocate up to $25,000 of your RRSPs toward your first home purchase. When it comes to saving up for a down payment, every penny really does count, and so while you are waiting to purchase your home, it can be useful to consider the age-old adage: “a penny saved, a penny earned.” In fact, when you consider the interest over the lifetime of your mortgage, each penny saved can save you much, much more.
Reduce Your Amortization Period
If you go through the mortgage pre-approval process and come to the conclusion that you might not actually need to use the entire amount that you are approved for, consider reducing your amortization period. In the short term, this means increasing your payment amounts, but over the long term, you’ll save a lot of money in interest costs.
Select a Mortgage That Offers Additional Payment Options
Every lender offers a different type of mortgage. If you know that you are going to be eager to pay down your mortgage, make sure that you let your mortgage broker know so that they can provide you with the mortgage that gives you the most flexibility when it comes to additional payments. Whether it is an annual lump sum payment or boosting your regular payments, setting more money towards paying down your mortgage will save you interest, especially when you have more equity in your home at the point of refinancing or renewing your mortgage .
Improve Your Credit Score
Depending on your financing options, we can help you understand how improving your credit score can get you great rates and good lending opportunities. The way that your credit score affects the amount you pay in interest changes from one lender to the next, and a qualified mortgage broker can assess your situation and show you simple ways to improve your credit score to offer you a better range of financing deals.
Consolidate Your Credit
Once you’ve established a great rate for your mortgage, consolidating your credit can be a smart way to save on interest rates. Talk to a professional financial advisor to see if you are spending more on your different credit rates than you need to. Consolidating debt is one of the easiest solutions to cutting interest costs, and we’re always more than happy to help our clients understand all their cost-cutting options.
When we work with lenders, we really go to bat for our clients. That includes negotiating the best mortgage interest rate possible. We are dedicated to client satisfaction every step of the way.
Thanks for reading!
Your London, Ontario Mortgage Brokers at Dominion Lending Centres Forest City Funding FSCO# 10671