Purchasing a home can be one of the biggest investment decisions we make in our lives. It is important to understand how mortgages work since we don't usually pay all the money upfront to purchase a home.
Depending on the type of mortgage you choose (fixed vs. variable, open vs. closed) you can save tons on interest over the life of the mortgage.
One tip is to increase the frequency of your mortgage payments. Instead of paying once a month, choose a bi-weekly payment plan. You cut the payment that you would regularly pay in a month into half and pay it every two weeks. Since there are 52 weeks in a year you actually end up making 13 mortgage payments in a year instead of 12. That extra payment cuts down the amount you pay in interest over the life of the loan dramatically and will allow you to own your home mortgage free years sooner.
With little to no change in your life style you can shave off $1000's in interest. For more on mortgage basics check out this video:
We spend a majority of our youth in school where we strive to get good grades. Good grades are important since they can lead to acceptance to a prestigious university or college. Also, with good enough grades it can lead to scholarships and one day graduate school. However in the "real world" educational success doesn't necessarily equate to financial intelligence or the guarantee of greater earning power. After all some of the wealthiest people in the world didn't even get their university degree (Bill Gates, Mike Lazaridis, Richard Branson and John D. Rockefeller).
This isn't a message against higher education. Instead, it's a message of the importance of your credit rating. When you approach a bank to get a mortgage for a home, they'll ask to look at your financial report card and much of it is contained in your credit score. No banker will care how you did in Econ 101 or Introduction to Basket Weaving. They will try to gauge your reliability for paying your bills on time and whether or not it will be risky to lend you a large amount of money.
That being said what's the best way to protect your credit score? Pay your bills on time! Ideally you would pay your credit card bills in full every month, but if you can't, at least make the minimum payments. Your credit score gets dinged when you miss a payment. Also, applying for several credit cards will ding your credit score. When you're automatically approved for a card that's fine, your score can be effected when you're actively searching for credit.
Canadian credit scores vary between 300 to 900. 300 being dreadful and 900 being the best possible score. Having a high score is like having an excellent bargaining chip during mortgage rate negotiations. People with high scores can negotiate a lower interest rate and save tons in the process. So be sure to protect yours!
Here's a video for students who want to develop a good credit rating. Also included are frequently asked questions from student investors:
