Saving on your mortgage
Six ways to save on your mortgage
- Increase your payment frequency
- Shorten your amortization period
- Increase your regular payment
- Choose a mortgage with a prepayment option
- Invest your tax refunds and cash windfalls
- Keep your payments high
1. Increase your payment frequency
Make a payment every two weeks instead of every month, and although you'll only be making one extra monthly payment every year, you'll cut your interest cost over the life of your mortgage. Arrange to make your payments at the same time you get paid.
2. Shorten your amortization period
You can choose the amortization up to 30 years that suits you best. Choose the shortest amortization period that you can manage and you'll save on interest.
3. Increase your regular payment
You can increase your payments up to 20% each year without penalty. You'll reduce your mortgage principal faster, which means you'll pay less interest.
4. Choose a mortgage with a prepayment option
Make an extra payment of up to 20% of the original principal each year. You'll pay less interest and be free of your mortgage sooner.
5. Invest your tax refunds and cash windfalls
If you're lucky enough to get a cash windfall or a tax refund, put it towards a lump-sum mortgage payment.
6. Keep your payments high
You may be tempted to make lower monthly payments if interest rates are down when you renew your mortgage. But remember, the less you pay and the longer the amortization, the more interest you'll end up paying over all.
Make payments as high as you can comfortably afford and pay off your mortgage as soon as you can and you'll save on your mortgage.
