News Releases

TORONTO, February 17, 2010 - Canadian homeowners can "stress test" their budget today so they don't become "stressed out" tomorrow by following some straightforward tips, according to BMO Bank of Montreal.

"For several months now, BMO has been encouraging Canadians to stress test their financial budget using a mortgage payment based on a higher interest rate," said Frank Techar, President, Personal and Commercial Banking, BMO Bank of Montreal. "If you are looking for a bank that will listen to you, help guide you and bring clarity to home financing decisions, come in and talk to a BMO Bank of Montreal Banker."

"Stretching the limits of your budget by choosing the maximum amortization period and a minimum down payment leaves you little wiggle room to deal with an unexpected financial challenge," said Jane Yuen, Senior Manager, Mortgages, BMO Bank of Montreal. "A meaningful down payment and shortening your amortization by making extra payments on your mortgage will save you tens of thousands of dollars in interest costs."

Top Tips to Consider:

Take a shorter amortization:

• The shorter the life of the mortgage, the less you pay in interest.
• Cutting your amortization period by 5 years from 30 to 25 years could save you over $53,000 in interest. You will be mortgage-free faster and your monthly payments will only increase by $84¹

Make a larger down payment:

• If you can provide a bigger down payment, it's an excellent way of helping you pay less interest over the life of your mortgage.

Make sure you can afford what you signed up for:

• Stress test your financial budget using a mortgage payment based on a higher interest rate
• Total housing costs (mortgage payments, property taxes, heating costs, etc.) should not consume more than one-third of household income.

Make pre-payments when you can:

• Pay weekly or bi-weekly instead of monthly.
• Take advantage of 20+20 prepayment privileges:
• Increase your mortgage payment (principal and interest) by up to 20 per cent over the current payment. This option can be exercised once each calendar year, at any time, without charge.
• Prepay up to 20 per cent of the original mortgage principal each calendar year. This option can be exercised in minimum amounts of $100 without charge, some conditions apply.

Always make sure you save for a rainy day:

• If you are up to your maximum in debt, you may not be well prepared for the leaky roof along the way.

Think carefully about fixed vs.

• While variable rates mortgages have been a winning strategy over the long term, fixed rate mortgages (currently at historic lows) come with the peace of mind of being insulated against rate increases.

In today's heated market, do not get locked into a bidding war that pushes your mortgage payments outside your comfort zone.

Get pre-approved for a mortgage so you know your budget.