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Manage your mortgage to save

Low interest rates may have you thinking about taking on more debt: the cost of a new home, moving to a larger home, or refinancing your existing home. If so, knowing what’s what with mortgages can save you money now and in the future.

To get you going, here are some of the mortgage basics you should know.

Rate-ability: The interest rate for a variable-rate mortgage is usually lower than that for a fixed-rate mortgage, but:

  • A fixed-rate mortgage locks in your interest rate for the full term so you have the security of knowing your monthly payment will remain the same
  • The interest rate of a variable-rate mortgage is tied to various fluid market conditions that can increase your interest rate and mortgage payments at any time

Flexibility: A flexiblemortgage usually includes the ability to change your payment frequency, increase the amount of your regular payments, or apply an additional lump-sum payment each year without a fee – meaning you can pay off your mortgage faster and save on interest costs.

Portability: A portablemortgage gives you the option of moving your current mortgage from one property to another (generally subject to a property appraisal).

Assumability: In the event that you need to sell your property before your mortgage maturity date, an assumable mortgage allows you to transfer your mortgage term to the new property owner (subject to standard credit approval) – thus saving on prepayment charges.

Re-advance-ability: A re-advanceablemortgage allows you to re-borrow the paid-down portion of your mortgage, up to the original registered mortgage amount. This cost-saving feature can save you money on the legal fees that are normally associated with a traditional mortgage refinance.

There is never a bad time to look closely at your mortgage options – especially when you work through them with your professional advisor to ensure you’re getting the best mortgage for your unique situation.

Date reviewed: June 17, 2015

This column, written and published by Investors Group Financial Services Inc. (in Québec – a Financial Services Firm), and Investors Group Securities Inc. (in Québec, a firm in Financial Planning) presents general information only and is not a solicitation to buy or sell any investments. Contact your own advisor for specific advice about your circumstances. For more information on this topic please contact your Investors Group Consultant.