Canadian homeowners know that paying off your mortgage is the key to achieving financial freedom. Knowing that, it’s surprising how many homeowners shy away from closed mortgages and opt to pay a higher interest rate to get the payment flexibility offered by an open mortgage. While it may sound reasonable in terms of making additional payments, the reality is that this strategy can end up costing you more money than you save.
While closed mortgages don’t offer the flexibility of making additional payments whenever you wish, most still allow you to pay an additional lump sum payment annually. There’s often a limit to how much you can add in these additional annual payments, but it’s typically a generous amount, such as ten or fifteen percent of the loan each and every year. This amount is usually more than enough to handle any additional payment the average homeowner might be able to put together above and beyond their regular mortgage payments. Unless you’re in an unusual situation where you’re expecting a large influx of cash – for example, an inheritance or a legal settlement – and you plan to use it to pay off your mortgage before the term of your current loan ends, the lower rate closed mortgages with additional annual payments are almost always your most cost effective choice.
Remember too that in addition to the additional annual payment, you can pay down your mortgage by any amount at the end of the loan’s term, which would typically be five years or less. Talk to your lender to find out what provisions their closed mortgages offer for repayment. In most cases, you’ll find the lower rate closed mortgage is your best option to pay down your mortgage in the shortest possible time. And don’t forget, while you’re paying down your mortgage, you’re also building equity faster too!
There are many more creative financing strategies that can help you pay off your mortgage faster. Ask The Mash Team for their advice and find out how you can make your dream of home ownership come true in record time. There’s no obligation to you, so why not call and take advantage of their expertise. You’ll be glad you did!