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Looking for the perfect mortgage?
Changing
the payment schedule |
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There are
significant benefits to paying off a mortgage at shorter payment intervals.
On the same $60,000 mortgage we were working with in the previous examples,
converting from monthly payments to accelerated weekly payments will result
in interest savings of approximately $38,000 and reduces the mortgage
repayment period by about 7 years.
Note that
an accelerated weekly payment is calculated by taking the monthly payment
and dividing by four, whereas a regular weekly payment is equal to the
sum of the 12 monthly payments divided by 52. Thus, the accelerated weekly
payment plan effectively results in almost 13 monthly payments over a
year.
Almost every
institution in Canada offers bi-weekly and weekly payment options in addition
to the more standard monthly payment option.
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MORTGAGES
ARE DIFFERENT FROM LOANS
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Mortgages
are somewhat different from simple loans. In the case of a residential
mortgage, you do not actually hold title to your property until the
mortgage is completely paid off. In the eyes of the financial institution,
they are simply lending you the use of their property until you have
repaid them the money they lent you to live on the property. Technically,
a property is conveyed to the mortgagee and it offers the mortgagor
two rights in exchange for making mortgage payments:
i)
the right of possession by the mortgagor and;
ii) the right of the mortgagor to obtain property from
the mortgagee when the mortgage is discharged. |
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