Home Mortgage Refinancing Tips

Want to pay of your mortgage sooner? You’re not alone. A recent Canada Mortgage and Housing Corporation (CMHC) survey showed that more than 75 per cent of survey respondents who bought a home in the previous year said being mortgage-free sooner was their goal.

Of course, choosing to be mortgage-free sooner is easier said than done but Butlermortgage.ca some tips to get you their quicker.

  • Your down payment should be as large as possible – put more down, pay less back, in principle and interest
  • Make more mortgage payments. There are two ways to do this; both will save you money – one more than the otherOption 1: Take the amount you would pay on your monthly plan, divide it and make two payments each month. For example, instead of one $1,000 monthly payment you can make two $500 payments. You’ll pay the same total either way, but by splitting the sum you’ll save on interest by making part of your monthly payment earlyOption 2: Save more when you pay weekly or bi-weekly instead of monthly. Why does this save you money? Not only will this approach save on interest like the first option, you will make extra payments every year. For example, a $1,000 monthly payment equals $12,000 per year. A $500 payment every two weeks equals $13,000 a year – $1,000 extra against your mortgage
  • Round up your mortgage payments – every dollar counts, round up odd number payments. For example, round up a payment of $987 to $1,000. The amount is small enough that it won’t break your budget but over time, will impact your mortgage
  • Got a raise, tax return or a bonus? Put a portion towards your mortgage. Not spending money you weren’t expecting won’t impact your lifestyle, applying it to your mortgage balance will impact how long it takes you to pay it off
  • Make anniversary payments – even on a closed mortgage. On most home mortgages, you can make additional payments (usually once a year for up to 20% of the amount owed). The amount you contribute applies to the principle, you save in interest costs
  • When interest rates drop, maintain the same payment amountWith a fixed-rate mortgage and falling interest rates, you may want to keep the same payment amount when renewing; less of the payment will apply interest, more will apply to your principal With a variable rate mortgage, the same applies; keep the same payment
  • When interest rates climb, increase your paymentsWhen rates increase, apply more to your mortgage. If you keep your payments the same, less will go towards the principal, more towards interest – the time it takes to pay off the mortgage will increase
  • Pick a shorter repayment periodAssess your amortization, a 15-year period instead of a 20-year period or a 25-year period will alter your payments and interest. Your payments on 15-year will be more, your interest paid overall will be less. Assess what’s best for you after each mortgage term – your ideal timeframe five years ago may not work to your advantage now
  • Refinancing can have advantagesCompared to previous eras, interest rates today are low. However, the lower rates drop, the more likely they are to rise later. To refinance your mortgage now may save you money later. As a homeowner, you may want to consider refinancing if:
    • Rates are low and any penalty you will incur for breaking your mortgage won’t outweigh the amount you save by switching
    • You will save more than the amount you do just from a lower rate. For example, the ability to make lump sum payments, make more payments or change your amortization period penalty free may work for you and outweigh any penalties
    • You hold high-interest debt (i.e. credit cards) that you can consolidate into your mortgage