There is one common goal Canadians have when getting a mortgage and that is paying it off as quickly as possible. The quicker the mortgage is paid the less interest has to be paid and more equity gets built in the home. Seventy eight percent of the people surveyed in a Canada Mortgage and Housing Corporation survey indicated that being mortgage free is their top priority and it’s a safe bet those numbers are still the same from 2008 when they were first gathered.
Most mortgage loan contracts with the major banks are very similar and all have applied pre-payment privileges and penalties written in the contract. There are mortgages that are fully open and can be paid at any time without penalty. Here, we will focus on standard closed mortgages as this is what most Canadian consumers look for.
Here are a few tips for people who are working on their first mortgage and looking to pay it off as fast as possible.
Down payment: The most obvious variable with regards to paying off your mortgage sooner is the down payment. The larger the down payment the less the mortgage and the smaller the payment; therefore the less interest paid.
Payment option: By paying the mortgage in an accelerated fashion either bi-weekly or weekly, really helps to reduce the overall amortization (life) of the mortgage and again reducing the overall interest paid.
Lump sum payments: You are able to make lump sum payments to reduce the principle balance owing on the loan. It will be clearly outlined in the contract as to what the percentage of prep payment is allowed and when you are able to make these lump sum payments.
Remember, all the above tips will help you be mortgage free faster; however it is important to speak with your mortgage professional so you are guaranteed to get a customized mortgage that is the best for you.
Drawing from a choice of over 40 lenders from major banks to private sources, Derek Lacey, AMP, is the Mortgage Alliance agent dedicated to finding you the right terms and the right mortgage for your needs. Email him at dlacey@tmacc.com or call him at 519-624-9550. Visit his website to learn more.