Thursday, June 16, 2011

Pay Off Your Mortgage?

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If you are considering a great way to invest, looking at your mortgage is a solid place to start. Paying down even a small portion of your mortgage can equate to an incredible savings over the life of your mortgage.

Mortgage Prepayment Options

There are a number of ways to pay off your mortgage faster. Below are some of them. Keep in mind these may vary depending on your particular circumstance. That is why it is very important to review and understand the prepayment privileges of your mortgage before you agree to the mortgage term.

The majority of the lenders allow you to make lump-sum payments to your mortgage between 10%-25% per year based on the value of your mortgage. Some allow you to pay based on the original amount of your mortgage allowing an even higher lump sum payment. Canadian mortgages are set up in such a way that you pay for the most interest in the first years and less as the mortgage decreases. That is why it is even more critical to get a jump-start on your mortgage and pay as much as you can early on.

‚Another great feature on many mortgages is the option to increase your regular monthly payment. Some lenders go as far as allowing you to double your payments per month but many allow increases of 15%. If you had a $1000 payment and increased it by just $150.00 per month, you could reduce your mortgage amortization by as much as 5.5 years on a $200K mortgage.

The nice thing about this option is you could start out making your required payments but if you get a raise at work or come into extra income for example, you can increase your monthly mortgage payments anytime. If you end up finding the new payments too much, in most all mortgage terms, you can go back to your original payment anytime. Many clients will choose a lower payment to be secure (say for example, you are in a high risk or lay-off industry) and increase it depending on your financial situation. This approach makes saving – paying down your mortgage – easier than trying to save for an annual lump sum payment.

Ć’Another factor to consider is when you can make a lump-sum payment. Some mortgages allow prepayments during the year, while others permit it only on the anniversary date. Still others allow you to make prepayments on the day you make your regular payment.

„Your mortgage can also be paid off faster by simply choosing a weekly payment vs. monthly. You end up making more payments per year than on a monthly schedule.

…Another option is to pay your mortgage payment based on a higher fixed rate payment schedule but get a variable rate mortgage. That way you are paying more each month towards the principle and not being subjected to fluctuations in the rates.

†The final and simple option is to round up your mortgage payment. Say you pay 1010 per month. Round it up to $1100. You would be amazed how every little bit helps to reducing the amortization of your mortgage. Even $50.0 extra per month helps you to be mortgage free sooner.

Find out how you can be Mortgage Free Sooner by contacting Canada’s Top 10 Mortgage Team
604 649-5991 or Toll Free 1-866-983-7426 or

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