All the ways to save on your mortgage.

June 10, 2022
Chirag Mehta, TNM Director of Operations

Feel like you're running up that (mortgage) hill?

I see more concern lately from our clients about rising interest rates and higher prices all around — worrying about the effects on their home affordability and monthly budgets.

Want to get ahead of rising rates to save more? Or really need some extra budget room?

That budget 'relief' can look different for every client:

• Access a lower rate
• Improve affordability or free-up monthly cash flow
• Pay off your mortgage faster
• Reduce your other debts
• Take advantage of home equity

Whether you're buying a home or already have one, here are some smart ideas to help make your mortgage work for you.

12 Great Ways to Save On Your Mortgage

1. Save with your better rate, right off the start

It's obvious (to me and our True North Mortgage brokers) that getting your best, lowest rate (for which you qualify) is a great way to save thousands. If you're buying a new home and go straight to your bank, you'll likely pay a higher rate because they 'bank' on your loyalty rather than compete strongly on rates.

Whereas we can access several lenders to find your best rate, PLUS pass along a volume discount to get it lower. We're known for having the best rates in the industry, and we work hard to achieve that for every client.

Our lowest advertised rates are for specific products, but no matter your situation — we can suggest ways to help you qualify for your absolute-best rate, depending on your application details. And if you'll be looking soon, make sure to hold your best rate now before rates rise again.

2. Switch to a lower rate

Feeling regretful about paying that higher mortgage rate with your big bank? You can check with us any time, especially during your mortgage renewal period, to see if we can switch you to a better rate. It's free, and there's no obligation to get our help.

You could also move from a higher fixed rate to a (currently) lower variable rate — but variable rates come with their own risk and are on the rise. Even though your payments may be lower for a while, they're still tied to prime rate adjustments and will increase with each Bank of Canada rate hike (and decrease again if they go down).

3. Save more with a conventional mortgage

Do you have money put away for a holiday or a big purchase? Consider adding it to your down payment to increase it to at least 20% of the home price to make it a 'conventional' mortgage. Not only will your mortgage size and monthly payments be reduced, you may also be able to extend your loan length to 30 years for even lower payments (see more on this below). As well, you won't need the mortgage default insurance required on a high-ratio mortgage (less than 20% down).

Here's the savings difference on a $500,000 home price with a down payment of 10% vs. 20% (for a 25-year amortization). For a conventional mortgage, the lender will charge a higher rate (no insurance on the loan), but you'll still save more and have a lower monthly payment:

4. Extend your amortization to lower your payments

On a purchase. If you have a conventional mortgage (20% down or more), you may be eligible for a 30-year amortization. A high-ratio mortgage (less than 20% down) requires a standard 25-year amortization.

On a renewal. If you've had your mortgage for a few years, you could extend your amortization back out to your original time.

Or, if you initially had a high-ratio mortgage at a 25-year amortization and have paid enough down to bring your Loan to Value (LTV) to 80% or lower, you may now qualify for a 30-year amortization.

Extending your amortization means it'll take longer to pay off your mortgage (more interest paid, too), but it may be the 'immediate' monthly cash-flow help you need. This action may require a refinance, which could incur fees depending on the lender, but no penalties if done at renewal.

5. Save on other debt

If you have other debt at higher interest rates, now is a good time to consolidate your loans into one mortgage payment at a lower rate. It can help you save money on interest and allow more budget space. The catch, however, is not to run up those other loan sources again and focus on paying down your new mortgage.

• Reduce the number of loans you're paying to just one mortgage
• Your monthly mortgage payment will be higher, but you'll avoid being nickel-and-dimed by other payments
• You could save thousands on interest costs and help free up cash flow

6. Pay a lump sum on your mortgage principal

Do you have some pandemic cash stashed? Think about spending it on your future (mortgage) self.

The other day in the Globe and Mail, I read that "Canadians are sitting on $300B in excess savings" (Matt Lundy, May 13, 2022). So, if you have some money stashed, now might be a great time to put it down on your mortgage. Using the money you 'saved' during the pandemic may seem counter-intuitive — but those extra funds can help you save thousands rather than spending your hard-earned savings on higher interest costs.

• A lower principal amount means paying less interest
• You could end up with a shorter amortization to pay off your mortgage faster
• Your extra principal payments could help buffer against future rate increases

7. Increase your mortgage payment frequency

If you have the budget room now, speed up those monthly payments to save thousands on interest and pay off your mortgage faster.

How much can you save by switching from monthly to accelerated bi-weekly payments? Let's take a $425K home price with a minimum 5% down payment (a high-ratio mortgage that requires default insurance) and pair it with our current 5-year fixed rate of 4.29% (25-year amortization):

8. Shorten your amortization

If you have the budget room, you can shorten your loan time (no refinance required), which will increase your monthly payment, but you'll pay off your mortgage faster to save thousands on interest — and you'll be assured of a shorter time frame to achieve a mortgage-free budget.

9. Access first-time home buyer programs and rebates

I wish I could reach every potential first-time buyer and tell them to talk to us.

There's a reason that we get so many 5-star reviews. Our brokers are highly trained, with hours and hours put in on top of what each employee brings to the table in knowledge and experience. We offer volume rate discounts, flexible mortgage options, savings on costs and fees — and targeted advice on programs and rebates to make their first mortgage a sound financial strategy.

10. Co-live, to co-mortgage.

To bring home affordability within reach, consider multigenerational or co-ownership of a larger home to share it with family or friends. You'll be able to pool your resources for a larger down payment and split other costs, including the monthly mortgage payment. Especially in higher-priced regions — the right planning may help you get into home ownership sooner than going it on your own.

11. Tap your home equity for lower-interest funds

With rising rates, your mortgage will still offer a much lower-interest way to borrow compared to credit cards or private loans. If you have equity built-up in your home, we can help look into your refinance or add a HELOC for extra funds for investment, home upgrades or schooling.

12. Skip a mortgage payment to pay off higher-interest debt that month

Some lenders will allow good-credit clients to skip a mortgage payment for at least one month (restrictions may apply). Using this option will 'defer' your mortgage principal for that same amount and will be added to your amortization length, which means you'll pay a little more interest over the lifetime of your mortgage. But this option may allow you to catch up elsewhere to save on interest and reduce debt obligations.

13. (Bonus Tip!) Watch out for mortgage traps that may cost you more

See an 'ultra-low' rate on the web? Our expert brokers can help you uncover the fine print to see if that bargain-bin rate comes with hefty restrictions or hidden fees that make up any savings difference you think you're getting.

We always say that your best rate is important, but so is having a flexible mortgage product to go with it. Your mortgage should work with you and your financial goals — not against you. If you think you'll need a change or want certain pre-payment options, the right mortgage fit matters to save money on penalties or other costs you didn't see coming.

We'll help you chase down your mortgage savings.

We're highly trained to help each client with the right strategy that works for them, to save the most on their mortgage.

I started at True North Mortgage as a broker and loved working here and helping clients get a better mortgage. Now, as Director of Operations, I help ensure our service continues to go above and beyond for our clients' mortgage needs, especially in times of change.

Have questions about your mortgage? We can zero-in on savings for your situation, and we're standing by to help. Give us a call, or drop by a store location.