As we continue to scrape the bottom of mortgage interest rates, is it time to consider fixing your rate to save money and time off of your amortization? The Bank of Canada promised that we would have these low levels until June, and June is less than a month away. We don’t know how fast interest rates will rise, but we do know they eventually will. The economy has shown signs that it is improving and the major banks have started raising fixed rates.
So, is it time to fix?
If You Lock In…
Shop Around for the Best Rate
If you decide to lock in at these super low rates make two extra steps to get the most bang for your buck and literally save thousands of dollars over the amortization period of your loan.
Set Payments to Bi-Weekly
Or, even better, weekly. Bi-weekly payment means you make one extra payment per year compared to monthly. Over the amortization time of your mortgage, these extra payments will save you thousands.
Round Up Payments
If bi-weekly payments are $829.68, round up to $900. The extra $70.32 will save you even more over the amortization of your mortgage.
If You Stick to Variable Rate…
Hope Interest Rates Climb
Then increase your payments to the level that you would be in a five-year fixed.
Pay Down Principal Quickly
This equals less principal to pay back when rates go back up. It will save you bundles in the long run.
Get Used to Payments at a Higher Rate
When you need to renew or decide to go with a fixed rate, you’ll have a few years of already making payments at that higher rate.
Play with Mortgage Calculators
See how much interest you save with the different options, along with how many years you’ll bump off your amortization.
More tips from Financial Coach David C. Lester can be found at his website I Heart Money.
Image courtesy of Images_of_Money.