Throughout the mortgage process, one question that will be asked is how you would like your mortgage payments set up. There are many options that you can pick from which include, monthly, semi-monthly, bi-weekly, accelerated bi-weekly, weekly or accelerated weekly. We often find that clients put very little consideration into this. However it is a decision that could possibly save you thousands of dollars in interest charges and shave years off your mortgage. If you look at the chart below you will see the difference in amortization interest savings between paying monthly compared to accelerated bi-weekly. This is the first step to paying off your mortgage…quick!

Example: Mortgage $200,000
Term: 5 years
Amortized: 25 years
Interest Rate: 3.09%

 

Monthly

Bi-Weekly

Accelerated Bi-Weekly

Payment

$955.76

$441.12

$477.88

Term Interest Cost

$28,588.80

$28,440.43

$28,059.05

Term Interest Savings

$0

$148.37

$529.75

Amortization Interest Cost

$86,723.96

$85,935.25

$75,521.26

Amortization Interest Savings

$0

$148.37

$11,204.21

Years

25

25

22.2

 

 

 

 

 

Next is taking advantage of the pre-payment options. Each and every time you put extra money onto your mortgage it goes directly to your principle. This means you are lowering your principle quicker and paying less interest in the long run.  Most lenders will allow you to make pre-payments in minimum increments of $100 up to 20% (varies depending on lender) of your total mortgage. As well, you have the option to increase your payments up to 20% (varies depending on lender).

Example: Mortgage $200,000
Term: 5 years
Amortized: 25 years
Interest Rate: 3.09%

 
Minimum
Additional $25
Additional $50
Additional $100
Bi- Weekly Payment
$441.12
$466.12
$491.12
$541.12
Amortization Interest Savings
$148.37
$7,450.82
$13,693.71
$23,578.53
End of Term Balance
$171,243.20
$167,733.75
$164,223.47
$157,202.82

 

**This is a fictional example and numbers may be different depending on lenders. It’s worth it to sit down and review your mortgage with a broker and see how you can save money and shave years off your mortgage.**