You can join thousands of Canadians taking advantage of pre-payment privileges on their mortgage. That’s right – you have options to pay your mortgage rate down sooner and get you closer to financial freedom. Learn how to use these benefits that are available to you by following these 3 simple steps.
Consider The Fees
First things first, check with your lender to see what the penalties are if you decide to increase your mortgage payments or pay off your mortgage in full. In some cases, there may not be a fee at all or just a small fee in which the rewards may far outweigh the penalty amount itself. Talk to a professional mortgage advisor who can help you do the calculations and present you with all the options available to you.
Find The Right Pre-Payment Privilege For You
- Monthly Pre-Payment
With a prepayment option you get the flexibility to increase your monthly mortgage payments to pay off your debt sooner. The way it works is that you will be entitled to a percentage increase on your original monthly allowance. Depending on the rules set by your lender, your percentage allowance could go up to 100% which is the equivalent of double your monthly payments.
- Lump Sum Payments
You may prefer a lump sum payment, which is a provision that will allow you to put a certain amount of money towards your mortgage principal. Your lender will provide you with an annual percentage limit that you are permitted to make towards paying down your mortgage. For example, your mortgage contract may allow you to make one lump-sum payment per year that is no more than 10% of what you owe. If you want to put more money down you may have to pay a pre-payment penalty. So talk to an advisor first about what’s best for your financial situation.
- Bi-weekly Payments
Simply by switching your monthly payments to bi-weekly payments you can accelerate the rate at which you pay your mortgage by adding 2 extra payments per year. It’s a fantastic way to chip away at your principal payments, paying your mortgage back much quicker than through the traditional method.
Enjoy The Advantages
One of the biggest benefits of making a pre-payment to your mortgage is that it will reduce your amortization period, as well as your interest due, freeing up money for you sooner. So, once you have found the right pre-payment option for you it’s now time to use the pre-payment privileges to your advantage. This extra money can be put to beneficial use like adding a new addition that will allow you to generate rental income or contribute to your RRSP and use the tax savings to add a further contribution towards your mortgage.
Talk to a mortgage advisor today at Financial Forum, we can help you create a better mortgage plan so you can start taking advantage of pre-payment privileges today!