Al & Peggy  Cunningham

Al & Peggy Cunningham

Brokers

RE/MAX West Realty Inc., Brokerage *

Mobile:
905-450-5500
Office:
905.857.7653
Email Me

Happy Friday! Is It Time For A Mortgage Check?

Time For A Mortgage Check?

Organizing a quick mortgage review may yield you some fruitful financial savings.

Reviewing your mortgage terms and options annually could result in having more money left over at the end of each month - and who doesn’t want that?!

For instance, are you exercising your penalty free extra payment privileges? Do you have any? Prepayment privileges allow you the opportunity to pay up to 20% extra per month and a total of up to 20% lump sum per year - without penalty! This means that for example a $300,000 mortgage on a 25-year amortization, a 20% monthly payment increase can generate $18,000 worth of savings AND help you to pay off your mortgage 5 years earlier! When you add-on the annual lump sum of $2,500, the savings are increased to just over $25,000 for the year and bumps you up to being mortgage-free 8 years earlier! You can also use the My Mortgage Toolbox app to calculate the potential savings from an extra payment.

When it comes to mortgage payments, another great question for your annual check-up is whether or not you are on the best payment frequency for your cash flow and to best optimize savings! Most lenders offer various payment frequency and an annual mortgage review can help identify the best frequency based on changing needs and cash flow situations. A monthly payment is simply a single large payment, paid once per month; this is the default that sets your amortization. A 25-year mortgage, paid monthly, will take 25 years to pay off but includes the added burden of one larger payment coming from one employment pay period. 

Alternatively, an accelerated bi-weekly payment pays your mortgage every two weeks. This frequency allows the mortgage payment to be split up into smaller payments vs a single, larger payment per month. This is especially ideal for households who get paid every two weeks as the reduction in cash flow is more on track with incoming income. These accelerated bi-weekly payments also offer interest savings, as you are actually making an extra payment each calendar year.

Completing a straight forward annual review will keep your home financing as lean and trim as possible. In other words, you will have a clean bill of mortgage health, which is just what the doctor ordered! 

Thank you Dominion Lending for these words of wisdom.  Remember, if you need some words of wisdom regarding the real estate market we are always here to update you in any way we can and it’s never any trouble.

 

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