Attention GTA Homeowners: 10 ways to get rid of your mortgage faster
April 3, 2014 @ 2:34 PM by: The Mortgage Providers
Having a mortgage can sometimes feel like a life sentence, but it doesn't have to. Michael Volpentesta, your GTA Private funding specialist, can help you pay off your mortgage faster and painlessly. If your goal is to be debt-free in 25 years or less then you will want to look over these informative tips. When you are shopping for a mortgage, look for one that allows you flexibility on payment options such as these below.
1. Pre-payments - All lenders offer you the option of extra payments (or pre-payments) which are applied to the principal loan amount. Check out what your lender allows and try to maximize on those allowances.
2. Double up - Many lenders allow you to make additional payments on your mortgage and these are applied to the principal amount and will reduce your mortgage balance. Some even allow you to skip a payment if you have made an extra one recently. This option is helpful in a crisis but its best not to utilize it if you are trying to shorten the life of your loan.
3. Round up - An extra $10.00 or $20.00 doesn't sound like a lot but if you add it to your mortgage payment each month you'll definitely notice the difference it makes over time. Adding even a small amount to your repayment is an easy and effective way to reduce the interest on your mortgage.
4. Annual boost - Try increasing the amount of your payments to the total maximum you can afford each year. If it's too difficult to make the jump or you end up in a circumstance that prohibits this increase, most lenders will let you reduce the amount back to the way it was before.
5. Switch from monthly to weekly or bi-weekly payments - If you change your mortgage payment to weekly or bi-weekly instead of monthly, you will automatically save thousands of dollars in interest. Example: the monthly repayments for a $100,000 mortgage at 8% interest amortized over 25 years would be $736.21. If you switched to bi-weekly on the same mortgage, your payments would be half the monthly amount, but over the life of the loan the savings would end up being $30,464 in interest because you will have made one extra payment during the year.
6. Steady Flow - If mortgage rates drop don't lower your payments. You should try to keep your repayments at the same level each month.
7. Lump-sum Payments - Cut down on interest by using any extra money that comes your way, such as bonuses, inheritances, RRSP refunds, or monetary gifts. This will reduce the principal amount you owe on your mortgage and save you tons in interest.
8. Refinance - Refinancing your mortgage into a cheaper rate can make a huge difference in the long run. Do your research so you can determine if the cost of breaking the contract will outweigh the savings benefits.
9. Earn More, Spend Less - If you get an increase in your salary consider increasing your mortgage payments. Everyone loves having extra disposable income but by reducing your debt you will benefit in the end.
10. Early Renewal Option - A mortgage with an option for early renewal will allow you to renew your mortgage before the maturity date and lock-in low rates for a new term. This is a great option if interest rates start to rise and you are locked into a mortgage that doesn't mature for a few more years.
If you live or work in the GTA or surrounding areas and have questions about any of these items please feel free to contact us at 1-866-398-1323 for more details. We are your Private Funding Specialists!