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Choosing the right mortgage payment option

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When applying for a mortgage in Ottawa, part of the process is choosing your mortgage payment preference.  There are 6 main payment options. Here is some information to help when choosing the right mortgage payment for you.

 

The right mortgage payment for you

 

Monthly

This is a popular option perhaps due to the simplicity of it for keeping track/budgeting. Also, many first time home buyers are used to paying rent monthly. Your monthly payment is simply your annual mortgage payment total divided by 12. (ie $12,000 annual divided by twelve is $1000)

 

Bi weekly non accelerated

This is another popular option and many enjoy it because it aligns with people’s bi weekly payroll cycle. There is a common misconception that bi weekly will help pay the mortgage off faster however the bi weekly accelerated option is what reduces your amortization. Bi weekly is your annual total mortgage payments divided by 26. (ie $12,000 annual divided by 26 is $461.53)

 

Bi weekly accelerated

This is a good option for those who want to pay their mortgage off faster and are not as cash flow sensitive. It has the convenience of bi weekly payments to match one’s payroll cycle, if paid bi weekly, however there is a larger payment. (ie $12,000 annual total divided by 24 is $500, but taken 26 times)

 

Weekly non accelerated

This helps reduce the size of each payment and is one option for those paid weekly. Or for a couple sharing the payments and each one would pay alternate weeks. (ie $12,000 total divided by 52 is $230.77)

 

Weekly accelerated

This helps reduce the amortization of the mortgage. ($12,000 divided by 48 is $250 but taken 52 times)

 

Semi-monthly

This allows you to have two payments taken on the same days each month, such as the 1st and the 16th. Each payment is one half of your monthly payment amount. This option does not assist in reducing your amortization. (ie $12,000 annual divided by 24 is $500 and taken 24 times)

 

Contact me today to learn more about choosing the right mortgage payment for you.

 

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