CMHC's New Premium Table

How to cut your mortgage costs

Whatever type of mortgage you choose, try to pay it down as quickly as possible. That way, you'll pay less interest and cut your mortgage costs.

When you apply for a mortgage

• Make the largest down payment you can.
• Pick the shortest amortization period you can afford.
• Pick an accelerated bi-weekly payment option. This works out to 13 monthly payments each year.
• Shop around for the best deal you can get.

3 ways to pay down your mortgage more quickly

1. Increase the amount of your payments.
2. Make a lump-sum payment each year (prepayment) in addition to your regular payments. For example, apply any tax refund or bonus to your mortgage.
3. Keep your payment the same if you renew at a lower interest rate.

Use this calculator to figure out how much money and how many years you can save by making prepayments.

Consider penalties for leaving early: If you plan to exit your mortgage before the end of your term, find out the penalty you may pay. Learn how this penalty is calculated.

Special features

Only choose the special features you need, like:

• Mortgage insurance – Covers your mortgage payments if you lose your job.
• Portability – Carry your mortgage with you when you sell your home and buy another one.
• Prepayment options – Make extra lump sum payments.
• An assumable mortgage – The buyer of your home can take over your mortgage.

Don’t just compare rates and features when you go mortgage shopping. Also consider penalties and fees. For example, look at mortgage prepayment penalties. Lenders must calculate and disclose these in a standardized way.

Investment Properties: The Pros And Cons

There are a number of advantages and disadvantages to buying a property and then renting it out. Talk to an accountant, lawyer, mortgage professional or other financial expert about how it may affect your taxes and financial situation.

3 Key Advantages

1. You pay less tax

You can deduct certain expenses from your income – reducing the taxes you owe. The list includes:

    -mortgage interest
    -property taxes
    -insurance
    -maintenance/upgrades
    -property management
    -utility bills (if you include them in the rent)

2. You may be able to deduct losses for tax purposes

If your expenses exceed your rental income, you may be able to deduct that loss from any other sources of income you have. This could reduce your total tax bill.

3. You get a regular monthly income

Other kinds of investments may pay out less often or income may be less predictable.
As a landlord, you can deduct certain property expenses from your income – reducing the taxes you owe. If your expenses exceed your rental income, you may be able to deduct that loss from any other sources of income you have.

3 Key Disadvantages

1. You take on the responsibilities and challenges of a landlord

Rental units need repair – sometimes on an emergency basis. Dealing with tenants can be challenging, especially if they don’t pay their rent on time and cash flow is tight. If you hire a property manager to take care of these things for you, their salary is an added cost.

2. It may be difficult and costly to sell the property later

Real estate is not a liquid investment. That means it can take time to sell, depending on market conditions. It can also be costly to sell due to real estate and legal fees.

3. It may be difficult to finance the purchase

You must have a down payment of at least 20% when you buy a second property. You may need a mortgage. And, you will have high monthly expenses to cover when you own a building. Of course, you hope the income you receive from your tenants will cover this.

Remember there are always pros and cons of purchasing and owning investment property. Do your research and find out if investing in property is right for you.

Click here more information on investment properties.