Canadian Mortgage Refinancing Part 4 – The Lowest Interest Rate Doesn’t Mean the Lowest Mortgage Interest

Canadian Mortgage Refinancing can be complex and the lowest interest rate doesn’t mean that you have the lowest interest mortgage. A mortgage involves a mortgage term, mortgage amortization and interest rate. Each will impact the amount of interest that you pay on your mortgage.

Mortgage interest compounds. There are several different ways that mortgage interest can compound and they are daily, monthly, semi-annually and annually (to name the most common frequencies to which mortgage interest can compound). For example, line of credit interest will almost always compound monthly (12x per/year), whereas conventional mortgages will often compound semi-annually (2x per/year). The more frequent the interest compounds, the more interest you pay. If a bank offered a 6% interest rate compounded monthly or a 6% interest rate compounded semi-annually, you would pay more interest in the example where the interest compounded monthly.

Some mortgages are “interest only” meaning that the monthly payments are calculated based on you only making interest payments monthly and interest only mortgages often compound monthly. Lines of credit and interest only mortgages offer the least likelihood of paying down your mortgage, unless you pay much more than your minimum monthly payment each month.

An ideal mortgage is one where the interest compounds semi-annually or annually and involves a monthly payment that pays both principal and interest. Usually a fixed rate mortgage will involve and interest rate that compounds semi-annually whereas a variable rate mortgage will often compound monthly.

Your mortgage term is the amount of time that your interest rate is guaranteed. This can be a double edge sword because locking in for a long time will ensure that your interest rate is secured but if interest goes down, the interest rate on your mortgage will not. With mortgage interest rates in Canada being at all-time lows many folks opt for variable rate mortgages that offer an option to lock in.

Your mortgage amortization will dictate how long you have to repay your mortgage. If you want to pay the lowest mortgage interest, well, the lower your amortization, the less mortgage interest you will pay. You don’t have to take out a mortgage that is amortized over 30 years. Plan your budget and mortgage payment based on a 20 or 25 year amortization and you will save thousands of dollars in interest overall.

Canadian mortgage refinancing can be negotiated at interest rates and terms that gives you the most for your borrowing buck but should be planned carefully. A local mortgage broker will almost always understand real-estate in your area and what mortgage products are available. You don’t want to end up with a mortgage where you think you have the lowest mortgage interest rate but are not actually paying the lowest mortgage that you could be.

You work hard for your money and you deserve to have a mortgage that will provide you with a great mortgage interest rate and terms that you can live with. This will not just come to you, you have to be informed and look around to find it.

For more information about Canadian mortgage refinancing, how to get the lowest mortgage interest rate and actually pay the lowest mortgage interest visit www.gtamortgagematters.com or call Paul Mangion at 416-204-0156.