Here are a few easy strategies you can use to save thousands of dollars in interest and pay your mortgage off years sooner!
Most people think when you get a mortgage you're stuck with it for 25 years, but what they don't realize is by using a couple of easy and painless ways to make some extra mortgage principal payments, you can cut years off the life of your mortgage and save thousands of dollars in needless interest costs.
Our Mortgage Eliminator Program
This is an easy strategy to take advantage of, and the results are dramatic! Let's say you have a mortgage of $200,000 with a typical 25 year amortization at 6% interest. Over the lifetime of that mortgage you will pay the bank $240,000 in interest. The monthly payments would be about $1,280 dollars a month.
Now, to use our Mortgage Eliminator Program
- Step 1 is to make your payments 'accelerated bi-weekly' (pay every 14 days).
- Step 2 is to increase that payment by 10% every year.
For example, year 1 would have a normal bi-weekly payment of $640. Simply add $64 to make your total payment $704. Do this every year for 10 years and you'll have paid off your mortgage 100% and saved yourself about $140,000 in interest.
Use Your Income Tax Refund To Make One Time Pre-Payments
Let's say you have that same $200,000 mortgage, and you have a $3,500 tax refund this year. (Very possible if you've contributed to your RRSP). If you take that $3,500 and apply it to your mortgage this year and the next and the next...you'll save over $79,000 in interest and shorten your mortgage by 9 years and 10 months! Not bad for a simple annual pre-payment.
Start Out With An ARM Mortgage
One of the best things you can do... if you can can handle a bit of stress...is to start out with an adjustable rate mortgage (ARM). This means the interest rate 'floats' with the Bank of Canada prime rate. You must be able to not stress out when interest rate fluctuations occur and they will because, if the prime rate goes up, so does your mortgage rate.
However, it has been proven that an ARM mortgage will save you lots in interest over the term of the mortgage. It is not for the faint of heart and not recommended for most first-time buyers who usually like to have the security of knowing what their rate will be for the next 5 years!