PLEASE. . Exercise care before jumping into "new" 2.99 Percent mortgages

[MortgageQueen]

I have a variable rate, it's currently at 2.15% so I'm pretty happy with that. Even though I've only owned my house for 9 months, 50% of my payments are currently coming off the principle!

Woohoo! You are one of the lucky ones Miss Dayle. I remember doing those rates for people last year. I believe that was the absolute lowest Variable rate discount ever got.
Congratulations! You win! Ha ha Keep hitting that principal as much as you can. You should have another year of that (hopefully) Even still, your rate will continue to be prime -.85 so even if it should go up 1/2 a point, you'll STILL be cheaper then 2.99 percent.

[MissDayle]

Woohoo! You are one of the lucky ones Miss Dayle. I remember doing those rates for people last year. I believe that was the absolute lowest Variable rate discount ever got.
Congratulations! You win! Ha ha Keep hitting that principal as much as you can. You should have another year of that (hopefully) Even still, your rate will continue to be prime -.85 so even if it should go up 1/2 a point, you'll STILL be cheaper then 2.99 percent.

Thanks!

When I mentioned 50% of my payment going towards principle, that is including an extra $100 added on to each bi-weekly payment. But with the rates where they are, even with the extra $100, the payment amount is still quite managable!

[MortgageQueen]

Thanks!

When I mentioned 50% of my payment going towards principle, that is including an extra $100 added on to each bi-weekly payment. But with the rates where they are, even with the extra $100, the payment amount is still quite managable!

That's awesome. that's what the best scenario is all about. . . We are living in a good time to take advantage of what is really unheard of low interest rates. . .for the fortunate that can take advantage of it. . .

[kanewtz]

I'm on a variable rate...currently 2.25%.
Currently paying double my mortgage...meaning i have an additional 100% of my mortgage going to my principle.
Have made 2 10% principle payments. Only had my mortgage since Nov 2010.

Depends on your financial situation. I was lucky. My wife's entire salary goes to our mortgage.

[NuCoupon]

I'm on a variable rate...currently 2.25%.
Currently paying double my mortgage...meaning i have an additional 100% of my mortgage going to my principle.
Have made 2 10% principle payments. Only had my mortgage since Nov 2010.

Depends on your financial situation. I was lucky. My wife's entire salary goes to our mortgage.

That's awesome! How often are you able to make 10% payments? We're able to make 20% but only once per year. Thanks!

[tjthemanto]

That's awesome! How often are you able to make 10% payments? We're able to make 20% but only once per year. Thanks!

Its usually only once per year for the lump sum pre-payment . But you can also generally increase your monthly payment by a a certain percentage ..also just changing your payment frequency from say monthly to bi-weekly or weekly makes a huge difference. So instead of paying say $ 1,000/month if you do $ 250/week you will reduce your amortization greatly.

Some banks do it by the calendar year & some do it by the anniversary year .

I was lucky my bank did it by the calendar year & not anniversary year . My MTG started in November ..so I made a pre-payment in December & then again in January as it was 2 different calendar years ..didn't have to wait a full year to make the second pre-payment

[MortgageQueen]

Its usually only once per year for the lump sum pre-payment . But you can also generally increase your monthly payment by a a certain percentage ..also just changing your payment frequency from say monthly to bi-weekly or weekly makes a huge difference. So instead of paying say $ 1,000/month if you do $ 250/week you will reduce your amortization greatly.

Some banks do it by the calendar year & some do it by the anniversary year .

I was lucky my bank did it by the calendar year & not anniversary year . My MTG started in November ..so I made a pre-payment in December & then again in January as it was 2 different calendar years ..didn't have to wait a full year to make the second pre-payment

You're right when you say that "usually" it's allowed Once per calendar year. . .BUT. . . . this is a perfect example why you should use a broker.
Somebody that wanted to increase/pay down quicker and at their convenience need to be matched to a Lender that will allow all this.

Most Lenders count on the fact that the average Cdn. will NOT remember the "anniversary date" or will not have the discipline to save for that "once a year" opportunity.
But if your the kind of person that let's say. . gets occasional Big commission checks or whatever, you want to be "permitted" to put that on your mortgage.
A broker can match you to a Lender that permits that.

That's just one scenario of a "type" of client. Everyone is individual and unique and should be matched to a Lender that can be as useful as possible to THEM. . not the other way around. After all, a Broker's service is FREE. .why wouldn't you?
Ok. . .stepping off my soapbox now. .sorry for the lecture! Lol

[ashedfc]

My MTG started in November ..so I made a pre-payment in December & then again in January as it was 2 different calendar years ..didn't have to wait a full year to make the second pre-payment

It all depends on the compounding of your mortgage... annual, semi-annual, quarterly, bimonthly, monthly or daily....What is the compounding period?

Lets say its semi-annually, than even if you pay down extra towards your principal, the lender will still apply interest for the entire 6 months (as if no extra principal was paid). The new principal amount is taken into consideration only after 6 months is over, & a new 6 months (semi-annual) calculation starts.

That's why mortgages which have daily interest compounding is beneficial, because with daily compounding, the interest only applied towards daily outstanding balance. The principal is effectively reduced the moment you make any principal payment..
(its like Lesser the better, same works in investing, for example in a GIC, if its daily compounding, it adds up to more interest)

[NuCoupon]

Its usually only once per year for the lump sum pre-payment . But you can also generally increase your monthly payment by a a certain percentage ..also just changing your payment frequency from say monthly to bi-weekly or weekly makes a huge difference. So instead of paying say $ 1,000/month if you do $ 250/week you will reduce your amortization greatly.

Some banks do it by the calendar year & some do it by the anniversary year .

I was lucky my bank did it by the calendar year & not anniversary year . My MTG started in November ..so I made a pre-payment in December & then again in January as it was 2 different calendar years ..didn't have to wait a full year to make the second pre-payment

Thanks for replying. It's always interesting to see what other people are doing. We went with a bi-weekly option. Also we can't double up our mortgage payments just increase it by 20% of original mortgage once a year, so as the mortgage gets paid down the percentage actually increases each year. Forgot to mention I made an error. It's not 20% lump sum of our original mortgage ONCE a year. We can pay a total of 20% extra off the original mortgage during one calendar year. We can increase our payments by 20% on the anniversary date. So, yes, we have to be organized. LOL!

[MortgageQueen]

It all depends on the compounding of your mortgage... annual, semi-annual, quarterly, bimonthly, monthly or daily....What is the compounding period?

Lets say its semi-annually, than even if you pay down extra towards your principal, the lender will still apply interest for the entire 6 months (as if no extra principal was paid). The new principal amount is taken into consideration only after 6 months is over, & a new 6 months (semi-annual) calculation starts.

That's why mortgages which have daily interest compounding is beneficial, because with daily compounding, the interest only applied towards daily outstanding balance. The principal is effectively reduced the moment you make any principal payment..

Variable mortgages are compounded monthly. . .so in this scenario, variable would be more desirable.

[kanewtz]

That's awesome! How often are you able to make 10% payments? We're able to make 20% but only once per year. Thanks!

I can make a 10% principle payment once every year.

I can increase my payment by 10% once per year.

I am with RBC.

[kanewtz]

Its usually only once per year for the lump sum pre-payment . But you can also generally increase your monthly payment by a a certain percentage ..also just changing your payment frequency from say monthly to bi-weekly or weekly makes a huge difference. So instead of paying say $ 1,000/month if you do $ 250/week you will reduce your amortization greatly.

Some banks do it by the calendar year & some do it by the anniversary year .

I was lucky my bank did it by the calendar year & not anniversary year . My MTG started in November ..so I made a pre-payment in December & then again in January as it was 2 different calendar years ..didn't have to wait a full year to make the second pre-payment

My payments are currently accelerated weekly

[MortgageQueen]

I can make a 10% principle payment once every year.

I can increase my payment by 10% once per year.

I am with RBC.

Did you mean you could increase your payment by 100 percent?? 10 percent seems unusually low??

[sweet sparrow]

Variable mortgages are compounded monthly. . .so in this scenario, variable would be more desirable.

I asked my broker and he said my variable rate is compounded semi-annually. Is there something I'm misunderstanding?

[kanewtz]

Did you mean you could increase your payment by 100 percent?? 10 percent seems unusually low??

I can increase my mortgage payment by 10% per year...and then double up my payment.

Example.
Say I pay 200/week.

I can increase 10% to $220/week and then double that up to $440/week.

The next year I can once again increase by 10% ($22) to $242 and then double that up for as long as I want (1 week, 1 month..between jun and aug) etc.