the money is from my portion of the house myself and bother bought 10 years ago we sold , have had the money for about a year

 

You will be fine then. They will just ask for proof of sale, and you will be good.

 

Thanks. A guy at work has it, as well as a couple of friends. Most people really like the Manulife One product although it does have some faults. The guy at work paid a $7k penalty to his convention Mortgage to sign up with Manulife One.

I do like the fact that there is lots of flexibility and you arent really locked in and can get out of it at anytime.

Think we are going to try it out.

 

^^This is an interesting point...

Every mortgage can be different but usually any additional payments directly reduce the principal which directly reduces the interest paid, even within the term of the mortgage.

As you get closer to the end, it is possible to pay off your mortgage before the end of the term & you do not pay any penalties nor any remaining interest if you pay it off within the additional & lump sum payment options of your mortgage.


As for the IRD or the 3 months interest policy, that's been around for as long as I can remember. It designed to protect the financial institution if the rates drop substantially & you want to re-finance. The FI doesn't want you to re-finance so they will penalize you heavily.
If the rates drop enough, it can make mathematical sense to pay this penalty & re-finance at a lower rate.
The IRD details & formula should be well defined in the fine print legalese of your mortgage.


One thing I would recommend to most people is to lock in at a fixed rate while the rates are currently so low & the difference between variable & fixed rates are so small.


Just my opinion on all of this. I do think Tate has this mortgage thing figured out, good on him!

 

Yeah, that would make sense, maybe contract terms are different. I understood that the amortization schedule wouldnt change over the term of the loan by pre-paying. And admittedly it was my lawyer who told me it wouldnt make a difference, not the mortgage broker. I'm gonna find out. Maybe he didn't understand my question. For sure it will bring the paid off date forward in time.

Because imagine if you are in your last term, making the extra payments till your are done with the principal a bit early, but the lender still keeps taking interest - does that even make sense. Actually VISA did this to me - I was only ever late on a VISA payement once in my life, a few years ago. They took their interest, I paid it all off right away, and even with nothing owing they charged me interest a couple more times over the next statement or two. They had some convoluted argument for why they do this, but it was all gobbledygook to me!

Anyway, having made prepayments in the past on another house, I only wish I were in the financial position to make prepayments now! Since January I've been eroding my savings to cover life essentials for me and the kid .... Better times will come, just keep working day and night and its bound to get better, right? ....Right??!

 

I've used Rose for my last 4 mortgages and have been very happy.

Rose Simard-Bachand, AMP
Dominion Lending Centres Plancorp
Phone: 403.292.0701
Cell: 403.561.2441
Fax: 403.398.0513
rsimard@dominionlending.ca
http://www.calgarymortgageexpert.com/

 

Looks can be very deceiving. People at work think I know what I'm talking about. Joke's on them!

 

[QUOTE=pistazie;3096400]
As I understand it, the lending institution still takes the same amount of interest over the term of your loan no matter if you double up payments etc. The only benefit is that it will reduce your principal next time you need to renew your mortgage.
QUOTE]


Stealth is correct. What you are describing would be something you might see in a lease.

Lots of options in mortgages and you really need to consider your own personal situation to make the best decisions. A good broker should be able to given you guidance for your situation.

Having said that, there may have been some confusion about the term and amortization period. When you took out your mortgage, payments were based on a specified amortization period and the rate was locked in for a specific term. Increasing the payments does not change the term or the amortization period and that may have been what you are thinking of. (Additionally, in Canada most mortgage interest is calculated a bit different than a personal loan but that is a differnt discussion.) However, your principal is reduced faster by making more frequent payments, and as your principal decreases faster than originally scheduled, the amount of interest paid is lower. At the end of the term, you usually have a choice, you could renew at current rates for another term and keep the amortization the same for example. this would lower your payments but not reduce the time it takes to repay the mortgage.

However, if you kept your payments the same (assuming rates did not change) your amortization period would be reduced and you would pay off the mortgage faster and pay much less interest. Bi weekly payments vs monthly payments can make a significant reduction in your overall cost to pay out a mortgage. Most bank sites have online calculators to illustrate the effect.

The Bank of Canada has been giving warnings that interest rates will go up over time and we have been enjoying record low rates. (Anyone remember the 80's when rates were 15 - 22% on mortgages?) this can be a good time to lock in low rates. If you want flexibility, you dont have to put all of the loan into one term. It is possible to put some in a one year term, some in a 2 some in a 3 etc and hedge a bit on the rate increase should it come. Additionally, if you have discipline, put a small portion in a variable rate or line of credit that allows you to pay as much as you want when you want - IF YOU HAVE DISCIPLINE. Beware that you dont want to reborrow on a HELOC or paying off your mortgage early will not happen. And you are exposed to increasing rates. But it can give you a bit of flexibility for lifes surprises.

If you can, make payments more frequently than monthly, double down at least one payment a year, and never reduce your payment at renewal. If you have more than 20% to lump sum down, do the extra amount in conjunction with your renewal as you can often get around the limitations at that time. Ask questions about the features - the best rate isnt necessarily the best mortgage if you have extra resources to work with.

Sorry for the long post.

What I really wanted to say is that yes, Tate has it figured out.