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Be Mortgage FREE Faster with Trevor Reid BMO Barrie Real Estate


Blog by Robert & Matthew Johnston | October 11th, 2011



Every homeowner knows that the best mortgage is no mortgage at all. So what can you do to pay down your mortgage faster — and save possibly thousands of dollars of interest at the same time?  Consider these three strategies.

Pay more frequently

Many people choose a “traditional” payment schedule, paying their mortgage on a monthly basis.  But switching to an accelerated weekly or bi-weekly (every other week) schedule will reduce your principal faster, because you make the equivalent of one month’s extra payment every year.  How much will you save? Assuming a $250,000 mortgage at 5.5% amortized over 25 years, changing from monthly to accelerated weekly payments will save you $37,863 in interest over the life of the mortgage (assuming interest rates stay the same) and you’ll own your home almost four years sooner.

Increase your regular payment

With a BMO mortgage, you can increase your mortgage payment by up to 20% of the original mortgage amount or up to 10% for a Low Rate Fixed Closed Mortgage once each calendar year.  Increasing your regular mortgage payment — by even a small amount — can make a huge difference over the long term. For example, suppose you have a $200,000 mortgage at 5% amortized over 25 years. Your regular monthly payment is $1,163.  Now, suppose you top that payment up to $1,200. That’s just an extra $37 each month, but over the life of the mortgage, you’ll save $10,034 in interest and be mortgage-free after about 23 1/2 years instead of 25.

Make a lump-sum prepayment

With a BMO mortgage, you can prepay, in $100 increments, up to 20% of the original mortgage amount, or up to 10% for the Low Rate Fixed Closed Mortgage each calendar year, without charge.  If you have the extra cash, it really pays to take advantage of this option.  Suppose you have a $180,000 mortgage at 4.75%, amortized over 25 years. If you can prepay $10,000 at the end of the first year, you’ll save $19,229 in interest and be mortgage free almost three years ahead of schedule.

Trevor Reid, Mortgage Specialist
Phone: (705) 725-3734  Cell: (705) 734-7950
Website: BMO Mortgage Specialist
Email: Trevor1.Reid@bmo.com