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Should I choose non accelerated or accelerated bi-weekly mortgage payments?
Understanding the difference between non-accelerated and accelerated bi-weekly mortgage payments is crucial for homeowners looking to manage their mortgage effectively. Here's a breakdown:
1. Non-Accelerated Bi-Weekly Payments:
- Frequency: Payments are made every two weeks, totalling 26 payments a year.
- Payment Calculation: The monthly mortgage payment is divided by two. This amount is paid every two weeks.
- Annual Total: Over the year, you effectively pay the same amount as you would with traditional monthly payments.
- Impact: Since you're not paying extra, this method doesn't significantly affect how quickly you pay off your mortgage or the total amount of interest you pay over the life of the loan.
2. Accelerated Bi-Weekly Payments:
- Frequency: Also involves making payments every two weeks, for a total of 26 payments a year.
- Payment Calculation: Here’s the key difference – rather than simply halving the monthly payment, the calculation is based on 13 months’ worth of payments divided by 26. This makes each payment slightly higher than with non-accelerated bi-weekly payments.
- Annual Total: You end up making one extra monthly payment each year.
- Impact: This additional payment directly reduces your principal balance, allowing you to pay off your mortgage faster and save on interest. It can significantly shorten your amortization period.
In summary, while both methods involve payments every two weeks, the accelerated option essentially has you making one extra monthly payment per year, directly reducing the principal. This acceleration leads to substantial savings on interest and a quicker path to paying off your mortgage.
Should I pay my own property taxes?
Opting to pay your own property taxes instead of having your lender do it as part of your mortgage can offer several advantages:
1. Control Over Finances: Paying your property taxes directly gives you more control over your finances. You manage when and how to pay, offering you flexibility in your budgeting and financial planning.
2. Interest Savings: When your lender collects property taxes with your mortgage payments, they often hold these funds in an escrow account until taxes are due. Typically, you don't earn interest on these funds. By paying taxes yourself, you can keep that money in an interest-bearing account until it’s due.
3. No Shortages or Surpluses: Handling your own property taxes eliminates the risk of shortages or surpluses. Lenders may estimate an incorrect amount for your taxes, but if you manage your taxes, you'll always pay the exact amount required.
4. Direct Communication with Tax Authorities: Paying your taxes directly means you'll be in direct contact with your local tax authority. This can lead to better awareness of tax bills, any changes in rates, and available discounts or exemptions.
5. Potential Discounts: Some tax authorities offer discounts for early or on-time payments. By managing your taxes yourself, you can take advantage of these savings opportunities.
6. Cash Flow Management: If you're disciplined in financial management, you can better align tax payments with your cash flow, rather than adhering to the schedule set by your mortgage escrow arrangement.
However, it’s important to be disciplined. You need to ensure that funds are available to cover your tax bill when it's due. Late payments can result in penalties, which can be costly and negatively impact your credit score. If you’re comfortable managing large, infrequent payments, handling your own property taxes can be a beneficial decision.
Mortgage brokers request documents up front for several important reasons, all aimed at facilitating a smoother, more efficient mortgage application process:
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1. Assessment of Financial Situation: By reviewing your financial documents early on, the broker can gain a comprehensive understanding of your financial status. This includes your income, debts, assets, and credit history, which are crucial for determining what kind of mortgage products you qualify for.
2. Accurate Recommendations: Having all relevant documents at the outset enables the broker to accurately assess which mortgage products and lenders are the best fit for your unique financial situation. This tailoring ensures that you are presented with the most suitable and competitive options.
3. Speed Up the Process: Gathering documents early can significantly speed up the application process. It means there’s less back-and-forth communication to gather additional information, leading to a quicker and more streamlined approval.
4. Pre-empting Lender Requirements: Mortgage brokers are familiar with the requirements of various lenders. By collecting all necessary documentation upfront, they can ensure your application aligns with specific lender criteria, reducing the likelihood of delays or rejections and avoiding dissapointment.
5. Building a Strong Application: Early collection of documents allows brokers to build a strong, comprehensive mortgage application on your behalf. This can increase the chances of approval and potentially secure more favorable terms.
6. Risk Mitigation: By reviewing your documents, brokers can identify and address any potential red flags in your application (like gaps in employment, debt levels, or credit issues) before submitting it to a lender. This proactive approach can mitigate risks and improve the likelihood of approval.
In summary, collecting documents upfront is a strategic approach by mortgage brokers to ensure they can provide the best possible service, tailored advice, and a faster, more effective mortgage application process.
To support the information you provided on your application the lender will require a variety of documents. The documents must be dated with in 30 days, display your name, and confirm account ownership. Below is a sampling of the required documents. Additional documents may be requested by the lender.
Letter of Employment
