Pay Today Save Tomorrow Pay Your Mortgage Off Sooner
When you first take out a mortgage, you're probably not thinking of ways to reduce the length of time or the amount of interest you'll pay. While many mortgage lenders offer ways for you to do both, only 32% of people actually take advantage. Before you apply for mortgage refinancing in Edmonton, ask your lender what options are available for you to pay extra on your mortgage. A little extra can go a long way in helping you pay your mortgage off sooner.
Prepay to Save the Day
Most banks or other lenders offer prepayment options with mortgages. It's important that you find out what options are available before refinancing your mortgage. The most common choices are to increase the frequency of your mortgage payments, increase your monthly payment by a certain percentage or to pay a lump sum yearly, based on the percentage allowed by your lender.
Pay More Often to Pay Off Sooner
Typically, you're offered to make your mortgage payments monthly, semi-monthly, bi-weekly, weekly or accelerated. If you're hoping to pay off your mortgage sooner, bi-weekly accelerated is usually the easiest way to achieve it. While bi-weekly and accelerated bi-weekly both mean you have two payments per month for a total of 26 payments, the way they are calculated makes a huge difference over the life of your mortgage.
For bi-weekly, your monthly amount is multiplied by 12, and then divided by 26. In the case of a payment of $1,000, this would be $461.54 per payment. With accelerated, your monthly amount is divided by two and withdrawn 26 times, which means you are paying $500 per payment, taking several years off your mortgage over time.
Larger Payments Make an Impact
If accelerated plans don't work for you, you might decide to increase the amount of your mortgage payments. You are typically allowed a certain percentage that you may add to your payment each month when working towards paying your mortgage off sooner. For example, by increasing your payment by just $100 per month, you can shave almost six years off of your mortgage lifespan.
Lump Sum Payments Are a Good Choice
Since your mortgage interest is calculated on the principal remaining balance, even a lump sum payment once a year can significantly reduce the length of time you pay on your mortgage. With some budgeting and advanced planning, investing your tax return annually into your mortgage is a good way to afford a lump sum payment without too much of a sacrifice to your daily life.
Mortgage Refinancing Saves Both Time and Money
Depending on your interest rate and the length of time remaining on your mortgage, refinancing might be your best way to save money in interest costs and reduce the time it takes to pay off your mortgage. At Dominion Lending Centres in Edmonton, we know that saving money and shortening the amount of time you pay for your mortgage can make a huge difference in your life. Contact us today to speak with one of our expert and experience mortgage brokers today.Request Mortgage Info