The real estate market in White Rock, South Surrey and Langley are hot, hot, HOT! Many homeowners are looking to sell their home and upgrade or purchase additional properties as investments. No matter if you’re buying your first home, downsizing, buying an investment property or moving the family into a larger home, nobody wants to be a slave to their mortgage forever. What could you do with 3+ years payment free? See our tips on how you can pay your mortgage down faster and be living the (mortgage free) dream before you know it!
We’ve all heard the car commercials promoting the option of bi-weekly payments and maybe your bank or mortgage professional has even mentioned them, but did you know that bi-weekly payments can shave YEARS off your mortgage? You might be paying 12 payments per year but you could switch to accelerated bi-weekly and pay smaller sums 26 times per year, meaning your mortgage would be paid off completely after just 22 years. One of the best features about this option is the money you can save in interest as well! Saving 3 years of payments also saves 3 years of interest.
Example: A $300,000 mortgage paid on a monthly basis with a 3 per cent interest rate over 25 years will cost you $125,920.44 in interest. However, if you increase your payment frequency to accelerated bi-weekly payments, you will shave nearly three years off of your amortization schedule, and save $16,058.57 in interest.
“Found Money” is any unexpected funds you may incur throughout the course of the year, or money that would be in addition to your normal income and budget. Perhaps you receive your tax return, a bonus, an inheritance or a monetary gift; if you put that directly to your mortgage, you could save time and money at the end of your mortgage.
Example: A one-time payment of $5,000 on a $250,000 mortgage at 3.75 per cent over 30 years will decrease your mortgage amortization by over 12 months.
This one may seem very simple so it’s surprising more people don’t do it! It’s pretty self explanatory; round your payment up to the next round number and shave years off your mortgage!
Example: Bi-weekly payments on a $230,000 mortgage with a 2.75 per cent interest rate over 30 years would be $468.53. Increase those bi-weekly payments by just $31.47 to $500, and you'll shave nearly six years off of the amortization schedule.
Most lenders and banks will allow borrowers to make an annual lump sum payment without penalty. This is similar to the “found money” logic but could be any leftover money from your spending budget or money to specifically budget to make this payment. While it may feel that a small amount won’t make a difference in the long run, the example below proves otherwise.
Example: An annual lump sum payment of $250 on a $400,000 mortgage at 3.50 per cent over 25 years, combined with a bi-weekly payment frequency will decrease your mortgage amortization by over 3.5 years.
Whatever stage you’re at in life or in your mortgage, you can make a difference in the amount of time you spend paying, and in the amount of interest your mortgage costs you by following these easy tips. Westport Properties has a team of knowledgeable, top rate realtors that are ready to help you make informed decisions in the market. See what our past clients have said here or contact us for answers to your questions or to get the buying or selling process started. We specialize in the White Rock, South Surrey and Langley real estate markets and now have an in-house Mortgage Broker, Rosa-Anna DeMichina, to help you!