Making Extra Payments
Do yourself a favour and consider making an extra principal payment on your mortgage as often as you can.
Paying extra amounts on your mortgage can make a big interest saving over time. When we select a mortgage company, privilege payments options are something that we look for. A 20% privilege payment will allow you to pay off up to $20,000 per year on a $100 000 mortgage. It is important that the privilege payment also be flexible to allow you to pay smaller payments on the mortgage and as often as you wish. An extra $1000 periodically paid on a mortgage can help you become mortgage free faster.
Payment # Interest Principal
13 583.62 138.51
14 582.82 139.31
15 582.02 140.11
16 581.22 140.91
17 580.41 141.72
18 579.59 142.54
19 578.77 143.36
20 577.95 144.18
21 577.12 145.01
22 576.28 145.85
23 575.45 146.68
24 574.6 147.53
25 573.75 148.38
26 572.9 149.23 Total 8096.5 2013.32
This is an example payment schedule for a mortgage of $100, 000 at 7% interest amortized over 25 years. This one includes CMHC fees.
Many people don’t realize that when you make a lump sum payment, from a tax return as an example, your payment goes directly to the principal increasing the equity by a large amount. Looking at my table you may notice that you save an entire year’s interest by making a one time payment of only $2013.32. You gain that equity and save an additional $8096. 50 in interest. Now that is a great return on investment.
For more specific information applicable to your unique situation contact your mortgage professional. If you need help finding one in the London area for your home please contact me and I will help you.
Thanks to Bigfoto for the picture
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