Looking to pay down your mortgage quicker? Your options for your pre-payments privileges varies Lenders and allows you to make extra payments without any penalty. When you are in the process of getting a mortgage, it is important to discuss with your Broker your financial goals and if you are wanting to be able to make extra payments. This will help your Broker determine which Lender and product is best suited for you and your family’s personal needs.
It is common nowadays for Banks/Lenders to give you the option to manage your mortgage and payments either by phone or by their website/online portal. Here are some common options depending on who your mortgage is through. In most cases the Lender has 2 out of the 3 of these options available to you under their pre-payment privilege policy.
Lump Sum Payment: Allows you to make payments up to 20% of the original mortgage amount annually. Depending on the Lender, the option may be there to set up these payments up automatically so that it comes out weekly, bi-weekly, monthly or if you prefer just a one time payment. Keep in mind this option typically has a minimum payment of $100.
Increased Payment: Allows you to increase your payment by up to 20% going forward. You can do this once annually. TIP: Find out the Lenders policy if you think you are going to want to drop your payment back down in the future. They may charge a fee or may only drop it back down to the original payment on exception. In most situations, I recommend using up your Lump Sum Payment option before using this option. This allows for flexibility in your extra payments should something happen.
Double up your mortgage payment: This will allow you to make an extra payment equal to no more than your current monthly payment. This is not a common option amongst Lenders, if it is available to you then you would most likely have all three of these pre-payment privileges as an option.
In addition to pre-payment privileges, consider going on accelerated payments when choosing your payment option instead of regular payments. This is another way to pay down your mortgage quicker by making 13 months of payments in a 12-month period. Picking accelerated payments is an easy way of making extra payments to your mortgage. In the long run this could save you thousands of dollars in interest and take years off your mortgage amortization.
Contact me if you have any questions.
Bryan Dubord 306.537.3344 bryan.dubord@mortgagegroup.com
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