Increase payments – Did you know that you can increase the number of mortgage payments you make each year? By switching from monthly to weekly or bi-weekly payment schedule, you will make the equivalent of one extra month’s payment each year. Another option would be to accelerate that payment. NUMBERS….
example: If your monthly payment is $1500 and you switch to a regular bi-weekly payment that would be $692.31. If you want to accelerate that payment then you would take the monthly payment /2=$750.00. This would mean that you would apply an extra $1499.94 on your mortgage in one year. In 5 years, this would equate to $7,499.70.
Shorten the amortization period – most people commonly choose an amortization period of 25 years. If you shorten it to even 20 years and increase your payments, your home will be mortgage-free sooner. You will end up paying less interest over the period that you have your mortgage.
Lump Sum Payments – not everyone has extra cash readily available, but if you do, consider making a lump sum payment each year. This will be applied towards your mortgage principle.
example: income tax refund
Check out payment options – most lenders are flexible and will let you change the payment frequency throughout the term of your mortgage. They will also let you increase the amount of your monthly/bi-weekly or weekly payment either temporarily or permanently. The increased payment goes directly towards your mortgage principle.
If you would like to learn more about ways to save money on your mortgage, contact me today!