10 TIPS FOR REDUCING HOME OWNERSHIP INTEREST COSTS
When considering whether or not to
purchase a home in Canada, it is important to understand the associated
interest costs. This is particularly true for individuals who are planning to
make a long-term commitment to the property. Interest costs are particularly
important if you are attempting to build equity in
your home. Any way you can reduce these costs can help you become financially
independent much more quickly. Here are some tips that can help you reduce the
amount of interest you pay on your home mortgage.
- Compare among lenders to
find the most competitive rates – The more competitive the rate is, the
lower your interest costs will be.
- Take advantage of fixed-rate
mortgages when possible – Fixed-rate mortgages offer lower interest rates
than variable-rate mortgages because they protect you
from rising interest rates over time.
- Pay off any outstanding
debts before applying for a mortgage- Having more debt can be associated
with higher interest rates. It is especially important to pay off
high-interest debts such as credit cards before applying for a mortgage.
- Get pre-approved by a lender
before shopping for a home- Pre-approval will give you a better idea
of what you can afford and will help you identify your ideal price range.
- Reduce the size of your down
payment to reduce borrowing costs – While making a larger down payment
means you borrow less money up front; it can increase your
borrowing costs over the long term because the loan amount is larger.
- Limit the number of lenders
you use to compare mortgage rates- if you compare rates with multiple
lenders, you are less likely to get the best rate available because you
will be considered a high-risk borrower.
- Obtain mortgage loan
insurance to reduce the required down payment – Mortgage loan insurance can reduce the required
down payment on a mortgage and make it easier to get approved for a home
- Arrange your monthly
payments to evenly distribute your principal and interest payments
throughout the year -Arranging your monthly payments to evenly distribute
your principal and interest payments throughout the year can greatly
reduce the total amount of interest paid over the term of your mortgage,
- Consider debt consolidation
to lower the amount of interest you pay on your credit cards- Debt consolidation can help you get a better
interest rate on your existing debt and lower your overall monthly debt
- Avoid getting an
adjustable-rate mortgage unless you can lock in at a fixed rate before the
interest rate adjusts- While adjustable-rate mortgages may offer lower interest
rates than other mortgage products, they typically have higher monthly
payment requirements that can quickly increase over time.