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and a 10% interest rate. Payment

Total interest

Interest savings**

Mortgage- free

Monthly payment (12 per year)

$895.00

paid $168,500

n/a

25 years

e i t h e r m o n t h l y , b i w e e k l y o r w e e k l y . T h e m o r e f r e -

quent payment schedules can save you money by increasing the amount paid toward the total mort- gage each year.

T h e m o r e f r e q u e n t y o u r p a y m e n t s i n a y e a r , t h e

lower the overall interest you pay on your mortgage.

Payment frequency*

This example is based on a $100,000 mortgage, 25-year amortization

$447.50 ***

$118,927

$49,573

18 years 10 months

$223.75 ***

$118,111

$50,389

18 years 9 months

Schedule of Payments

A mortgage loan is repaid in regular payments

,

Biweekly payment (26 per year)

Weekly payment (52 per year)

*These are rounded numbers for illustrative purposes only.

**Assumes an interest rate of 10% for the entire 25 years. *** $895.00 extra paid annually

Open Mortgage

Closed Mortgage

This means you can repay the loan, in part or in full, at any time without penalty. Interest rates are usually higher on this type of loan.

An open mortgage can be a good choice if you plan to sell your home in the near future. Most lenders will allow you to convert to a closed mort- gage at any time.

Many experts suggest taking an open mortgage for a short term in times of high rates and convert- ing to a longer term when rates fall.

A closed mortgage usually offers the lowest inter- est rate available. It’s a good choice if you’d like to have a fixed rate to work your budget around for a few years. However, closed mortgages are not flex-

ible and there are often penalties or restrictive conditions attached to prepayments or additional lump sum payments. It may not be the best choice if you might move before the end of the term.

STEP 5 • ARRANGING YOUR MORTGAGE

29

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