Paying Your Mortgage Off Faster

WHY SHOULD YOU PAY OFF YOUR MORTGAGE?

Paying off your mortgage faster can potentially save you thousands of dollars in interest costs. Flexible prepayment options allow you to put extra cash towards your mortgage principal without incurring charges. You can combine the lump sum payment privilege with the increased payment privilege. You can also make your mortgage payments more frequently which will increase your savings and pay off your mortgage at a faster pace.

PREPAYMENT PRIVILEGES

1. Make a lump-sum payment against your mortgage principal

Provided your mortgage is up to date, you can make lump-sum prepayments of up to 20% of the original or renewed mortgage amount during each anniversary year without added charges or penalties. For example, this means you can pay 10% one month, another 5% two months later and another 5% three months later. You cannot pay more than 20% during the anniversary year without penalty and this privilege cannot be carried over from one year to another. If you miss paying 20% in one year, you cannot add that 20% to the next year.

2. Increase your regular mortgage payment and shorten your amortization

You can choose to increase the amount of your regular mortgage payment (principal and interest) by up to 20% of the original or renewed payment amount during each anniversary year without added charges or penalties. For example, this means you can increase your payment by 10% one month, another 5% two months later, and another 5% three months later. You cannot carry this privilege over from one year to another. If you miss increasing your payments by up to 20% in one year you cannot add that 20% to the next year. Paying more each month shortens your amortization and can significantly reduce your interest costs over time.

Pay More Frequently

By switching from monthly mortgage payments to an accelerated weekly or bi-weekly schedule, you can become mortgage-free sooner and save thousands.

Accelerated payments are a great way to achieve interest cost savings and reduce the time it takes to pay down your mortgage.

  • An accelerated weekly payment is calculated by dividing your normal monthly payment by four. You then make 52 weekly payments and by the end of a year you will have paid the equivalent of one extra monthly payment.
  • An accelerated bi-weekly payment is calculated by dividing your normal monthly payment by two. You then make 26 bi-weekly payments and by the end of the year you will have paid the equivalent of one extra monthly payment.

Non-accelerated payments are frequently used for budgeting purposes; you can match your mortgage payment to your pay day.

  • A non-accelerated weekly payment is calculated by multiplying your monthly payment by 12 and dividing by 52. You pay the same amount during a year as you would by making monthly payments but they are scheduled more frequently.
  • A non-accelerated bi-weekly payment is calculated by multiplying your monthly payment by 12 and dividing by 26. You pay the same amount during a year as you would by making monthly payments but they are scheduled more frequently.