How low can you go?

Posted: April 16, 2010 in Buyers, Mortgages, Sellers
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(NC)—With spring upon us, we are amid what is typically one of the busiest times of the year for homebuyers. With interest rates expected to rise, it’s time more Canadian homeowners and prospective buyers consider taking a shorter amortization for their mortgage.

When designing a financial plan, many people opt for the longest length of time to pay back their mortgage. The hitch comes with the thousands of dollars more they end up paying in interest over those years.

“While many people choose the longest length of time to pay back their mortgage, they could pay thousands of dollars more in interest in the long run,” said Jane Yuen, Senior Manager of Mortgages, BMO Bank of Montreal. “Cutting your amortization period by 5 years from 30 to 25 years could save you over $53,000 in interest. You will be mortgage-free faster and your monthly payments will only increase by $84.”

Being prepared for an rate increase is crucial and the best place to start is with a financial planner or mortgage specialist. They will help to stress-test your budget using a mortgage payment that’s based on a higher interest rate, and find a way to get your amortization period down before rates go up.

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