How Simple Changes to a Mortgage Could Mean Big Savings
Most Canadians tend to focus on the interest rate and how much they can save with a lower rate when shopping around for a mortgage but there are other ways they can save money.
By paying a few extra dollars every two weeks rather than the usual monthly payment can help borrowers save thousands of dollars in interest. This can also shorten the time it takes to pay off a mortgage by years.
Making an extra lump sum payment once a year can also help borrowers save a lot of money.
Wade Stayzer, Meridian Credit Union’s Vice President of Sales and Service, says homeowners need to understand how much they can afford to pay and work from there.
According to Wade, people really need to understand their personal financial situation and determine what it is they are trying to accomplish. He also mentioned that the rules surrounding how much borrowers can increase payments or put down in a lump sum payment vary depending on the mortgage contract, therefore it is crucial to read the fine print on the contract.
Wade recommends increasing regular payments over saving up and making an yearly lump sum payment for those looking to pay off a mortgage faster and can afford to do so.
This lump sum payment goes directly towards the principal and not towards the interest, therefore homeowners will save a lot of money in terms of interest.
Wade finally recommends that people need to be mindful of putting more money into investments rather than extra mortgage payments due to record low interest rates. He says the choice will depend on an individual’s financial plan and risk tolerance.