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FCAC Helps Canadians Save On Interest Costs
by PJ Wade
Years of favourable interest rates may have lulled Canadians into thinking that low rates are all it takes to ensure they spend less on mortgage interest. Threats of rising rates may cause some home buyers and property owners to focus on rates when there are ways to save hundreds and thousands on mortgage interest. Mortgage holders or mortgagors can reduce the total amount of interest paid over the mortgage term through a number of strategies when they sign on or renew, including: - Decrease the amortization period
- Increase the size of your mortgage payment
- Switch to an accelerated bi-weekly mortgage payment.
Bi-weekly payments are equivalent to making an extra monthly payment each year. Using this approach, a C$100,000 mortgage held at 6 per cent interest with a 25-year amortization period, would be paid off approximately four years faster. With a shorter amortization period -- 20 years instead of 25 – even with regular monthly payments, interest savings would almost reach C$21,000. When negotiating for a new mortgage or a renewal, solid knowledge of the ins and outs of mortgages may help knock one per cent or more off the posted rate. When you apply for a mortgage, Federal Cost of Borrowing Regulations require that a federally-regulated mortgage lender must indicate in your mortgage agreement or contract how much will be paid in interest charges over the term of the mortgage. Consequently, borrowers can determine how much impact variations in terms and conditions of the agreement could have on total interest before signing. Want help getting the best financial deals possible when shopping for a mortgage or credit card, or making other financial decisions that can affect your real estate buying power? "Consumers need to know and understand the real costs of mortgages before they can make an informed decision on the type of mortgage they need," says Bill Knight, Commissioner of the Financial Consumer Agency of Canada (FCAC). "What they don't know now could cost them thousands of dollars in unanticipated interest and penalty charges down the road." The FCAC, a federal regulatory agency responsible for enforcing many of the federal laws that protect consumers dealing with financial institutions, operates through co-operation with other organizations, information programs, a toll-free consumer help line (1-866-461-3222) and its website, to promote greater awareness of the financial system and the rights and responsibilities of consumers. To save as much on mortgage interest and related costs as possible, Knight suggests that consumers should start by asking themselves three questions: - How long will I stay in this house/condominium?
- How quickly do I want to pay off my mortgage?
- How much can I afford to pay each month?
FCAC, funded through assessments on the financial institutions that it regulates, works to strengthen supervision of consumer issues and expand consumer education in the financial sector which, according to the FCAC mandate, includes: - All banks.
- Insurance companies that are federally incorporated or registered.
- Trust and loan companies that are federally incorporated or registered.
- Co-operative credit associations that are federally incorporated or registered.
The agency, which has received more than 1,600 consumer inquiries and complaints about mortgages since it began operating in 2001, took common consumer concerns and questions into consideration when developing its mortgage toolkit. The kit includes explanations of mortgage terms, contract conditions and consumer rights as well as tips on how to pay off a mortgage faster. The "mortgage qualifier calculator" reveals whether you'd qualify for a mortgage loan, given your current financial circumstances. FCAC may also help you reduce some of the consumer debt that can limit the size of mortgage you'd qualify for. At the end of 2003, an estimated 74.3 million credit cards were in circulation in Canada which represents 3.1 cards for every Canadian over the age of 18. FCAC's online guide, "Credit Cards and You," incorporates recent changes to interest rates, service fees and other important credit card features such as credit balance insurance, provides current information for reducing credit card costs. Sections like "Managing Your Money" explain how to save with a credit card while the comparison shopping guide outlines key cost-saving features of more than 200 cards offered by 26 Canadian credit card issuers. Start your comparison shopping with FCAC when you want answers to these and other financial questions: - What should I know when opening a bank account?
- How can I find the best banking service package for my needs?
- What should I know when considering an investment product tied to the stock market's performance like index-linked deposits?
- What is the latest update on fees imposed by financial institutions for use of their ABMs?
- If I have a complaint about a financial institution, can FCAC help?
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