How to De-mortgage Quickly
Nowadays, extending an amortization period to 30 years is often common to qualify for a higher mortgage amount. You should not get discouraged with a thought that you are stuck with that amortization period. By taking an advantage of some of the prepayment privileges offered by lenders, it is possible to shorten the amortization. Here are the some of the simple tips you can implement:
A mortgage of $250,000 at 5.3%, amortized over 30 years resulted in a monthly payment of $1,379.33.
1. Increase the Frequency of Payment
It is a simple rule to remember. The more frequently you pay, the shorter your amortization period would be. Divide a monthly payment of $1,379.33 by two, and convert a payment to bi-weekly payment of $689.67. Your amortization period can be reduced to 24 years 11 months.
2. Make a Lump Sum Annual Contribution
In addition to making a bi-weekly payment, use your tax refund and pay against the principal of your mortgage. Assuming a lump-sum payment of $2000 is paid every year during a 5 -year term, the amortization period can be reduced further down to 23 years 2 months resulted in a savings of $20,217.83 in interest.
3. Round Up Your Mortgage Payment
Rounding up your bi-weekly payment to $720, meaning, a slightly more than a toonie a day, could further reduce the amortization to 17 years 7 months with an interest savings of $63,250.09 if combined with a lump sum annual contribution.
Implementing the above simple tips, you are able to significantly reduce your mortgage by more than 13 years and save a significant amount in interests. Make the best use of those prepayment privileges and get out of the mortgage quicker.