Here’s something most people get wrong about mortgages: they think the lowest interest rate is the biggest way to save money.
After helping thousands of people with their mortgages, I can tell you the interest rate is only about one-tenth of where your real savings come from. The other nine-tenths? That’s what we’re going to talk about.
These strategies save clients an average of $45,000 on a $500,000 mortgage. Your results will vary based on your situation, but the potential is huge.
Port Your CMHC Fees (Most People Don’t Know This Exists)
You probably know you can port your mortgage when you move to a new house. But did you know you can also port your CMHC insurance fees?
This one’s a big money saver that almost nobody uses.
Here’s how it works: When you move to a more expensive house, CMHC gives you credit for the insured amount from your first home. You only pay insurance fees on the additional amount you’re borrowing.
Real Example
Say your first home cost $250,000 and you’re buying a new one for $500,000. Instead of paying CMHC fees on the full $500,000, you only pay on the extra $250,000. That’s thousands of dollars in savings.
Always ask your lender: “Are you porting my CMHC fees?” If they say no, ask why. This should be available to you.
Book Your Strategy CallRequest a Partial Charge Registration
When a lender registers your mortgage on your property title, they can do it two ways:
- Full charge: They register 100% of your purchase price
- Partial charge: They only register the amount you’re actually borrowing
Most lenders will do a partial charge if you ask. And this simple request can cut your closing costs dramatically.
Real Client Example
A client bought a home for $2 million and borrowed $1 million. The lender initially quoted $3,000 for title insurance based on registering the full $2 million purchase price.
By requesting a partial charge of just the $1 million loan amount, the title insurance fee dropped to $700. That’s $2,300 saved with one simple question.
Bonus: A partial charge also gives you more flexibility later. If you want to access equity through another lender down the road, you’ll actually be able to do it.
Pick the Right Lender for Penalty Calculations
Think you’ll never break your mortgage early? Think again. Most people keep their mortgage for only three years before they sell, move, refinance, or make some other change.
Mortgage penalties vary wildly between lenders. Here’s what you need to know:
Variable rate mortgages: Most charge a simple three months’ interest penalty. Pretty straightforward.
Fixed rate mortgages: This is where it gets tricky. Banks calculate penalties two different ways:
- Posted rate method: Used by most big banks. They use their regular posted rate (before discounts) to calculate your penalty.
- Discounted rate method: Used by alternative lenders. They use your actual discounted rate to calculate penalties.
Just by choosing a lender that uses the discounted rate method, you can save nearly half on potential penalties. No other changes needed.
Use Refinance Blends to Avoid Penalties
Some lenders charge you a penalty when you refinance, even if you’re staying with them. Others offer something called a “refinance blend” that lets you refinance with zero penalty.
Here’s how it works: Say you got a 5-year fixed mortgage and need to refinance after one year. You have four years left on your term.
The lender will:
- Keep your original money at your original rate
- Add the new refinance amount at the current 4-year rate (matching your remaining term)
- Blend it all together into one payment
- Charge you nothing
Before you sign with any lender, ask: “Can I refinance this mortgage later without a penalty?” If they say no, consider switching lenders.
Choose Variable Over Fixed (Usually)
Looking at 25 years of data, variable rates have consistently been cheaper than fixed rates.
The average 5-year fixed rate over that time? About 5.75%. The average 5-year variable rate? About 4.75%. That’s a full percentage point difference.
I know what you’re thinking: “But what if rates go up?”
Here’s the thing about variable rates:
- They’re tied to the economy
- They increase in small chunks (usually 0.25% at a time)
- Lenders watch the market carefully between increases
- If an increase hurts the economy too much, they pause
Plus, variable rate mortgages have way lower penalties if you need to break them early. And you can usually lock in to a fixed rate anytime during your term.
Variable rates are especially safe during tough economic times. When the economy struggles, big rate increases are unlikely.
Think About Adding a Line of Credit
Whether you should get just a mortgage, just a line of credit, or both depends on what’s happening in your life over the next year.
Consider adding a line of credit if you’re expecting:
- A big annual bonus
- An inheritance
- Money from selling another property
- Any other large chunk of cash
Here’s why: Mortgages have lower rates than lines of credit. But if you pay down your mortgage too much, you’ll get hit with a penalty. Lines of credit have no penalty for paydowns.
The smart move? If you’re getting a big payment soon, make your mortgage smaller and your line of credit bigger. Then pay down the line of credit when the money comes in.
Get a Segmented Line of Credit
If you do get a line of credit, ask for a segmented one. This lets you divide your total credit into separate chunks for different purposes.
For example, with a $200,000 line of credit, you could:
- Put $50,000 in one segment for a car loan
- Use another segment for investment properties
- Keep another for stock market investing
Each segment gets its own statement. This makes accounting way easier, especially at tax time. Your accountant will thank you.
Don’t Obsess Over Prepayment Options (Unless You’ll Actually Use Them)
Most big lenders let you prepay 10% of your mortgage each year on a 5-year fixed. Some let you prepay up to 20%.
But here’s the question: Will you actually use this?
Look at your budget honestly. If you can’t afford to make extra payments, then prepayment options don’t matter for you.
Watch Out for Too-Good-To-Be-True Rates
Some super low rates come with nasty strings attached:
- You can’t refinance
- You can’t make extra payments
- You can’t discharge the mortgage except by selling
I’ve seen people accept these rates without reading the fine print. Then they want to access equity for renovations and discover they’re completely stuck.
The lowest rate is not always the best rate. You need to look at the whole picture.
Add Renovation Money to Your Purchase
Many lenders let you add improvement funds to your mortgage at purchase. Usually up to $40,000 or 10-20% of your purchase price, depending on the lender.
Why this is smart:
- You finance renovations at your mortgage rate instead of credit card rates
- You move into your dream home immediately
- You avoid refinancing penalties later
Here’s the process:
- Give your lender renovation quotes
- An appraiser confirms your home will be worth the projected value after renovations
- The lender holds the renovation funds in trust
- You complete the work
- The lender releases the money to you
The tricky part? Many contractors want a big deposit upfront. A good mortgage broker can provide an approval letter showing the contractor that funds are guaranteed upon completion. This usually solves the problem.
The Big Picture
These eight strategies work together to save serious money. Some will apply to your situation, others won’t. But knowing about them gives you power.
When you’re shopping for a mortgage, don’t just ask about rates. Ask about:
- Porting CMHC fees
- Partial charge registration
- How they calculate penalties
- Refinance blends
- Adding renovation funds
Most mortgage brokers and even bank staff don’t know about all of these strategies. Now you do.
The families who save the most money aren’t the ones who find the lowest rate. They’re the ones who understand how mortgages actually work and ask the right questions.
Your mortgage is probably your biggest financial commitment. Taking the time to understand these strategies can put tens of thousands of dollars back in your pocket.
Book Your Strategy CallFrequently Asked Questions
Porting CMHC fees means transferring your mortgage insurance from one property to another. When you buy a more expensive home, CMHC gives you credit for the insured amount on your first home and only charges fees on the additional amount you’re borrowing. For example, if you move from a $250,000 home to a $500,000 home, you only pay CMHC fees on the extra $250,000, saving you thousands of dollars.
Full charge means the lender registers 100% of your purchase price on your property title. Partial charge means they only register the amount you’re actually borrowing. Partial charge registration can dramatically reduce your closing costs (like title insurance) and gives you more flexibility to access equity through other lenders in the future.
Big banks typically use the posted rate method (their regular rate before discounts) to calculate penalties, while alternative lenders use the discounted rate method (your actual rate). Choosing a lender that uses the discounted rate method can save you nearly half on potential penalties if you need to break your mortgage early.
A refinance blend lets you refinance your mortgage without paying a penalty. The lender keeps your original money at your original rate, adds the new refinance amount at the current rate matching your remaining term, and blends it all into one payment with no penalty charged.
Based on 25 years of data, variable rates have consistently been about one percentage point cheaper than fixed rates on average. Variable rates increase in small increments and are tied to the economy. They also have lower penalties if you break the mortgage early, and you can usually lock in to a fixed rate anytime. Variable rates are especially safe during tough economic times.
Add a line of credit if you expect to receive large lump sums within the next year (bonuses, inheritance, property sale proceeds). This lets you pay down the line of credit without penalty when the money arrives, while keeping your lower-rate mortgage intact. If you won’t have extra funds coming in, stick with maximizing your mortgage for the better rate.
A segmented line of credit divides your total credit into separate chunks for different purposes (car loan, investment properties, stock market investing, etc.). Each segment gets its own statement, making accounting and tax preparation much easier, especially for tracking business expenses and investment costs.
Yes, many lenders let you add improvement funds to your mortgage at purchase, typically up to $40,000 or 10-20% of your purchase price. You provide renovation quotes, an appraiser confirms the projected value, and the lender holds funds in trust until work is completed. This lets you finance renovations at your mortgage rate instead of expensive credit card rates.
