All you need to know about mortgages
All you need to know about mortgages and loans
Canadian and American mortgages are calculated the same way. Both of these mortgages have the interest owing calculated at the end of the month using a monthly interest factor. Every penny in excess of the monthly interest automatically goes towards lowering the principal. The monthly interest factor is derived from the annual interest rate.
For a given annual interest rate a Canadian monthly interest factor is smaller than the American monthly interest factor due to different regulations. A Canadian mortgage will always cost you less in total interest and have a lower monthly payment than an American mortgage for the same principal, annual interest rate and amortization period.
Mathematically speaking a mortgage is just a special name for a loan used to purchase a house. American mortgages and American personal loans are calculated the same way.
Canadian personal loans are calculated the same way as American personal loans. Canadian mortgages have a lower monthly interest factor due to Canadian regulations thus the Canadian flag selection is for Canadian mortgages only.
Weekly and biweekly payment mortgages are calculated using the same logic as the monthly payment mortgage and thus have a weekly and biweekly interest factor. The method used to calculate these two interest factors dramatically influences the total interest.
Thus it is not enough to just know the biweekly payment, you must also know the number of biweekly payments required to amortize or pay off the mortgage or be given an amortization schedule.
Some American lenders do not follow the above method for biweekly mortgages. They hold the extra payments in escrow and apply it towards the principal at the end of the year. This method is not a true biweekly amortization schedule and thus CANNOT save you as much in interest costs. The longer you wait to apply money towards the principal the larger the interest costs.