What is the difference between bi-weekly payments and bi-weekly accelerated payments?
Unless otherwise specified, most lenders will set the payment frequency to monthly by default. This is standard. However, some clients prefer to pay on a biweekly basis; often to coincide with their pay cheques. When you choose to pay biweekly, it simply means that your payments split into 26 payments per year (every 2 weeks) rather than 12 equal payments (every month). These biweekly payments will result in the mortgage being paid off at the same rate as if you had paid monthly. If you choose biweekly accelerated payments, you pay a little bit more every 2 weeks and you pay off your mortgage faster. Many people choose this payment method if their intention is to be mortgage free sooner. How much more are you paying every 2 weeks? This is essentially calculated by taking the standard monthly payment and dividing it by 2.For example: Let's say you had a $300,000 mortgage @ 3.5% with a 25 year amortization. Your monthly payments would be $1497.81. In other words, if the rate remained constant, you would pay off your mortgage in 25 years with these monthly payments. If you selected bi-weekly payments, you payments would be $690.76 every 2 weeks. This would also result in you paying off your mortgage in 25 years. However, if you selected bi-weekly accelerated payments, your payments would be $1497.81/2 = $748.91 every 2 weeks. At this rate, you would pay off your mortgage almost 3 years early (~22 years). So by paying an extra $58.15 every 2 weeks, you have knocked off almost 3 years from your mortgage AND you have saved over $19K in interest! Those extra payments really add up!!!
Why would I use a mortgage broker when I can deal with my bank directly?
A mortgage broker advocates for you and is not restricted to any one bank. Thus, we are able to shop around, negotiate on your behalf, fight for better rates and better conditions. We actually good relationships with many people in the banks and even they will often send their clients to us when they can't help them or when they feel that we are in a better position to do a better job for the client. We will return the favour when the tables are turned. Mortgage brokers work with the banks for you and give you options. BUT make sure you trust your mortgage broker because sometimes they will charge fees!
Why would I ever want or need a second mortgage?
Second mortgages serve a useful purpose but should be used with caution. They should be short term solutions for long term gain. A second mortgage is a loan using your home as collateral (as all mortgages are) but they are in second position. It's a second loan that is placed on the property and if something goes wrong, the first lender will collect their money in priority over the second lender. This is why second mortgages are generally more expensive than first mortgages; because they are riskier. When is it a good idea to get a second mortgage? There are many circumstances but again, all should be short term. For example, you may have a first mortgage with primary lender who will charge a penalty to refinance or exit your existing mortgage. Or you may need to rebuild your credit to qualify for a mortgage with a better rate. Second mortgages will give you the money that you need to consolidate your high interest debt (credit cards for example) or to do those renovations/repairs on your home with the intention of refinancing with a primary lender in one or 2 years after the renovations are complete or after the credit has been improved.
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