As a mortgage borrower – particularly if this is your first time embarking upon homeownership – there’s no doubt you have a load of questions related to the mortgage process. Aside from the most common questions, such as those relating to mortgage rate, the maximum mortgage amount you’ll be able to receive, as well as how much money you’ll need to provide for a down payment, the following five questions and answers will help you dig a little deeper into the mortgage financing process.

1. Can I make lump-sum or other prepayments on my mortgage without being penalized? Most lenders enable lump-sum payments and increased mortgage payments to a maximum amount per year. But, since each lender and product is different, it’s important to check stipulations on prepayments prior to signing your mortgage papers. Most “no frills” mortgage products offering the lowest rates often do not allow for prepayments.

2. What mortgage term is best for me? Terms typically range from six months up to 10 years. The first consideration when comparing various mortgage terms is to understand that a longer term generally means a higher corresponding interest rate and a shorter term generally means a lower corresponding interest rate. While this generalization may lead you to believe that a shorter term is always the preferred option, this isn’t always the case. Sometimes there are other factors – either in the financial markets or in your own life – you’ll also have to take into consideration. If paying your mortgage each month places you close to the financial edge of your comfort zone, you may want to opt for a longer mortgage term, such as five or 10 years, so that you can ensure that you’ll be able to afford your mortgage payments should interest rates increase.

3. Is my mortgage portable? Fixed-rate products usually have a portability option. Lenders often use a “blended” system where your current mortgage rate stays the same on the mortgage amount ported over to the new property and the new balance is calculated using the current rate. With variable-rate mortgages, however, porting is usually not available. This means that when breaking your existing mortgage, you will face a penalty. This charge may or may not be

reimbursed with your new mortgage. Some lenders allow you to port your mortgage, but your sale and purchase have to happen on the same day, while others offer extended periods.

4. What amortization will work best for me?The lending industry’s benchmark amortization period is 25 years, and this is also the standard used by lenders when discussing mortgage offers, as well as the basis for mortgage calculators and payment tables. Shorter timeframes are also available. The main reason to opt for a shorter amortization period is that you’ll become mortgage-free sooner. And since you’re agreeing to pay off your mortgage in a shorter period of time, the interest you pay over the life of the mortgage is, therefore, greatly reduced. A shorter amortization also affords the luxury of building up equity in your home sooner. While it pays to opt for a shorter amortization period, other considerations must be made before selecting your amortization. Because you’re reducing the actual number of mortgage payments you make to pay off your mortgage, your regular payments will be higher. So if your income is irregular because you’re paid commission or if you’re buying a home for the first time and will be carrying a large mortgage, a shorter amortization period that increases your regular payment amount and ties up your cash flow may not be your best option.

5. How do I ensure my credit score enables me to qualify for the best possible rate? There are several things you can do to ensure your credit remains in good standing. Following are five steps you can follow: 1) Pay down credit cards. This is the #1 way to increase your credit score. 2) Limit the use of credit cards. If there’s a balance at the end of the month, this affects your score – credit formulas don’t take into account the fact that you may have paid the balance off the next month. 3) Check credit limits. Ensure everything’s up to date as old bills that have been paid can come back to haunt you. 4) Keep old cards. Older credit is better credit. Use older cards periodically and then pay them off. 5) Don’t let mistakes build up. Always dispute any mistakes or situations that may harm your score by making the credit bureau aware of each situation.

As always, if you have any questions about the information above or your mortgage in general, I’m here to help!

Thermostats control heating and cooling appliances in houses. A setback thermostat gives the user the option of changing the temperature setting automatically at night and also during the workday when the occupants have left the house. A setback thermostat can help reduce overall household energy consumption.

A conventional thermostat simply regulates house heating at one temperature. For instance, in the winter, if you set the thermostat to 20°C (68°F), it will activate the heating system when the house temperature drops below 20°C and will shut the system off when the house air warms up past 20°C.

A setback thermostat contains an electronic clock. It can automatically turn down the temperature setting at night when you’re asleep, or during the day when you’re at work. It can also return the temperature to a more comfortable level before you wake up or arrive home from work. That way, you can have the energy savings of a lowered thermostat setting without the discomfort of having to wait for the house to heat up again.

The setback thermostat can also be used as a set-forward thermostat for an air conditioning system. It can allow the house to heat up when it’s unoccupied and return it to a comfortable temperature before occupants return from daytime activities.

Although this article deals with setback thermostats and forced-air heating systems generally, you can apply some of the advice to electric baseboards or to summer usage.

You can use a standard thermostat to set your house temperature lower during times when the house is unoccupied. This will lead to similar energy savings as with a setback thermostat, but without the convenience.

What’s a normal house temperature?

CMHC randomly surveyed Canadian households. Thermostat settings in the winter tend to be quite closely grouped around 20°C – 21°C (68°F – 70°F). Summer temperatures range much more widely, depending upon whether the house has air conditioning.

Where should I set the thermostat?

The more you reduce the thermostat setting, the greater the possibility for savings. Generally, a drop of 2°C (3.6°F) will lead to some savings and little risk. Some householders reduce temperatures 4°C – 6°C (7°F – 11°F). But, temperature differences this large create potential comfort and moisture problems.

Does setting back the temperature save energy?

Yes. Research from the Canadian Centre for Housing Technology shows that winter setbacks for the houses tested would result in heating cost savings of 5-15%. The highest savings came with a setback of 6°C (11°F). See CMHC’s Research Highlight: Effects of Thermostat Setting on Energy Consumption.

Savings for the summer were about the same, although simply raising the thermostat set point in the summer from 22°C (71°F) to 24°C (75°F) led to more significant savings than the set-forward strategy and also offered better indoor humidity control.

Note that these savings are for two airtight, well-insulated, unoccupied houses. The savings in your home may vary, but are likely to be in the same range.

To learn more about other sustainable technologies and practices that can improve the performance of your home as well as information on owning or buying a home, call Canada Mortgage and Housing Corporation (CMHC) at 1-800-668-2642 or visitwww.cmhc.ca.

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