Tips to pay off a mortgage fasterDecember 3, 2012
PRESS RELEASE: September 20, 2012 – Mortgages are one of the main sources of debt in Canadian households. It’s important to understand how a mortgage works and how to pay the least amount of interest possible. ComparaSave.com is offering these mortgage tips to become mortgage-free sooner and avoid overpaying on interest.
There are several ways to reduce mortgage debt and pay-off a mortgage faster. Some of these variables include: interest rates, payment frequency, amortization period, and extra payments. By managing these factors, it will make it easier to get the most out of Canadian mortgages, pay the least amount of interest possible and most importantly, becoming mortgage-free.
Choose a shorter amortization period
The longer the amortization period, the more interest paid and the longer it will take to become mortgage-free. A shorter amortization period will make regular mortgage payments higher, as the number of mortgage payments is being reduced. If able to afford higher monthly payments, consider selecting a 15 to 20-year amortization period instead of a 25-year period.
Selecting biweekly mortgage payments instead of monthly or bi-monthly payments equals two additional payments each and every year. This may not seem like much, but over the course of a Canadian mortgage, it adds up. For a small change, biweekly payments produce big results.
Paying more on a mortgage is always a good idea; particularly since any additional payment will go directly towards paying off the principle and not toward interest – which immediately and significantly reduces the amount owing. Look for mortgages that allow a monthly payment increase or lump sum payments. Many mortgages allow this annually to a maximum of 20% of the principle. Also, if looking to build up a retirement fund then consider contributing more to an RRSP account and using tax refunds towards your mortgage for double the benefit.
As mortgage rates fluctuate, consider refinancing your mortgage to lower your payments and reduce the amount of interest. While refinancing, it may be a good time to reduce the amortization period and save even more.
Put it all Together
By combining the above techniques – shorter amortization, biweekly payments, additional payments and refinancing mortgage rates – you can save a significant amount in interest costs and cut your mortgage repayment.
Online rate comparison services like ComparaSave.com make it easy for homebuyers to find the right mortgage rate; compare mortgage rates instantly from mortgage, brokers, credit unions and other financial institutions.