Have you
spoken to a mortgage broker lately? When it’s time to renew your mortgage you
have the freedom to do a number of things that are not possible at any other
time without a financial penalty. Renewal
time is an opportunity.
Have you
looked at your mortgage amortization lately?
Let’s say that you started your present mortgage 10 years ago and you
had a 30 year amortization. You now have 20 years left on your mortgage but
your situation has changed. Your children have grown up and one is ready to
leave for college and another one will follow in a couple of years. An easy way
to help the kids out would be to refinance your home. However, the rules have changed and if the
value of your home has not risen a lot and you have not paid down the balance
you may not have the 20+% you need to withdraw the equity.
Another possible solution would be to use the
amortization on your mortgage to help you achiever your financial goals.
You can
extend the amortization and lower your monthly payments thus freeing up cash
flow.
Here’s an
example. With a balance of $400,000 on your mortgage
|
Amortization
|
Interest Rate
|
Monthly Payment
|
Savings
|
|
20 years
|
3.19%
|
$2252.
|
|
|
25 years
|
3.19%
|
$1932
|
$320
|
|
30 years
|
3.19%
|
$1723
|
$529
|
By adding 5
years to your mortgage you can lower your payments by $320 a month. If that’s
not enough and you have more than 20% equity , in other words, your mortgage is
less than 80% of the value of the home, you can extend your mortgage to 30
years with most lenders. This will free up $520 a month. When your children
graduate you or your mortgage broker can contact the lender and have your
amortization lowered again. Note that
changing the amortization can result in costs. Check with your Dominion Lending
Centres mortgage broker before you make any changes to your mortgage. For more information visit www.davidcooke.ca
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