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Want to end your mortgage payments faster?
May 08, 2014
Scotiabank advocates “small changes, big differences”. This can be applied to many aspects of life but it is particularly powerful when it comes to paying off your mortgage and saving thousands of dollars. If you don’t have the resources to save a huge prepayment amount you can still make a big difference by making small changes regularly.
The following are recommendations from Mr. Stafford (Managing Director of real estate secured lending) :
1) Understand the power of one dollar added to your mortgage payment today. If you don’t pay that dollar today it will be the last dollar you pay off in 25 years. By paying it today you are saving interest on it for the next 25 years – expensive!
2) Switch to accelerated bi-weekly or weekly payments – if your monthly payment is $800, switch to $400 every 2 weeks. The most expensive strategy but the one most people apply.
3) Increase your payments a little bit every year. If your payments are $400 every 2 weeks increase it to $410 or $420. Massive difference – even bigger than bi-weekly payments.
4) Make small lump sum payments.i.e. one lady applies whatever is left in her chequing account the night before payday. Some weeks it is $50 and others $200. Some go to their online banking site and round their mortgage balance down each week to the nearest $100 (balance $99,960.52 – pay $60.52). Some weeks it is $20 sometimes $85.
5) Round up your payment. If your bi-weekly payment is $447 ask your lender to round it up to $450 or $500.
6) At renewal time, put lower interest rates to work for you. If you renew at a lower rate and you’re living comfortably with your current payment keep it the same.
Source Adapted from Global and Mail: http://caamp.org/meloncms/media/GM%20Mortgages%2004.24.14.pdf