If there is anything 2020 has taught Canadians, it is that you never know when money might get tight. A question we have been receiving recently is how to reduce your mortgage payments in Mississauga. As a leading mortgage specialist here in Ontario, StartMYPlan strives to ensure our clients have all the support and information you need to be successful when buying your home or restructuring a mortgage. Here is what you need to know about when you reduce a mortgage payment in Mississauga.
Change the Length of Your Mortgage Term
One of the first suggestions we offer clients looking to reduce mortgage payments in Mississauga is to consider restructuring their mortgage timeframe. The longer you pay off your home, the smaller the payments become. For example, if you make payments on a 30-year loan over several years, you could restructure the debt to spread out over another 30-years. This would significantly decrease the size of each payment, but you would be paying for longer.
If you do change the length, it is also essential to recognize that you will incur additional interest due to the extended time in repayment. You will also be in debt for longer. There are many factors to consider when taking this step, but it is viable to reduce mortgage payment in Mississauga.
Consider Changing Home or Mortgage Insurance
While your home insurance is a monthly necessity, you may be able to find cheaper coverage if you shop around. This won’t change your mortgage rate, but it can still positively impact your monthly spending. There is a way to reduce mortgage costs by removing mortgage insurance from your loan on the mortgage side of things. This may require you to switch your mortgage into a different type of loan through your lender.
Speak to your mortgage broker in Mississauga to determine if reducing or removing mortgage or home insurance is an option for you and how it might affect your payments.
Refinance for a Reduced Interest Rate
If you’re looking for a significant reduction in your mortgage, one way many Canadian borrowers go about it is by renewing your mortgage for a reduced rate. Before you undertake this change, it is vital to speak to your broker about any prepayment penalties you could incur. It may not be worth it to refinance in your current stage of repayment. However, that doesn’t rule it out as an option.
When you renew your mortgage, the floor opens for negotiations on your mortgage type or current mortgage term agreements. This often gives you the option of making a one-time payment to your principal balance, which will decrease that principal, and in turn, reduce monthly payments on your mortgage.
Sometimes, like with your insurance payments, other monthly amounts can be reduced to benefit your mortgage payment. Rather than opting for a mortgage refinancing, you might consider a debt consolidation mortgage loan.
When you consolidate debt like credit cards and personal lines of credit under a consolidation mortgage loan, you reduce your interest rate significantly on those loans. Credit cards tend to have much higher rates than a mortgage from your local bank. This makes consolidation for repayment a smart choice if you are looking for ways to trim back on monthly expenses.
Prepayment Payment Reduction
Depending on your Canadian lender, you may have an option for payment reduction for up to four months based on your life changes. For example, your bank may allow you payment reduction for one month or prepaid over consecutive months if you:
- Get laid off from work.
- Whether you are in school or taking part-time courses to improve your income.
- Have a new child and need to spend time at home following the birth.
- Have an ill family member who needs care, which requires you to take time off from work.
The prepaid reduction system works by allowing you to make more regular payments frequently or make a large prepayment against your loan’s principal balance.
Relocate and Downsize
It may not always be the favorite option, but it is certainly a simple one. Moving into a new, lower, and more affordable home can drastically change your mortgage rates because you essentially wind up with a new smaller mortgage. Now, some upfront costs are considered, such as those for legal fees, your realtor, and moving expenses. However, over the long stretch of your life in that new home, you will save money compared to the amount spent on a mortgage for a much larger dwelling.
Downsizing is a cost-efficient plan in many ways. Not only does it afford you a reduced mortgage rate, but it also relaxes energy, water, and heat payments. It costs far less to heat a small 2-bedroom bungalow than it does a large five bedroom split level.
Finally, with times being financial, many Canadian lenders are open to mortgage deferrals due to reasons relating to Covid-19. This arrangement lets you delay paying on your mortgage for a time determined by you and your lender. When this time-period finishes, you resume your mortgage payments as usual, possibly with an extended payment schedule.
If deferral is something you are seriously considering, you should know that it could result in higher payments later while it is an easy solution. Always speak to your lender and get all the facts about your agreement before you decide.