Less Weight on the Shoulders

Given the record debt of Canadian households, BMO Bank of Montreal suggests that owners opt for a mortgage loan with a 25-year amortization period.
“The shorter your mortgage, the less interest charges you’ll pay in the end. By choosing a 25-year amortization period, you free yourself from your mortgage quicker, and you can start to save more for your long-term objectives, such as financing your retirement,” the financial institution explains.
BMO Bank of Montreal offers other tips to help Canadians pay their mortgage loan faster. For example: why not give your mortgage an imaginary shock by considering a scenario

whereby you find yourself trapped in repaying your debts?
“Simulate a budget crisis by calculating your mortgage payments that take into account higher interest rates,” states BMO. “If your rate increases by just one percent, from say five to six percent, it will cost you $146 more per month to repay a $250,000 mortgage loan amortized over 25 years.”

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Here’s a second tip that makes sense: it’s always better to pay off small debts before you think about taking on a bigger debt, such as buying a large house.

We all know that the higher your down payment, the lower your interest charges will be.

“If you put down a minimum of 20 percent of the purchase price of your property, you won’t have to pay mortgage insurance,” adds BMO Bank of Montreal.

Other effective methods include paying the mortgage down quicker and making weekly payments.

As for the thorny issue of fixed or variable rates, BMO Bank of Montreal replies with the classic answer. Fixed rates reassure worried minds while variable rates, a winning formula in the long term, are mainly suited for owners who aren’t afraid of risk.

Finally, your total housing bill (mortgage, taxes, heating) should not exceed one-third of household income. Also, keep in mind that real estate is always among the most profitable investments.

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