Date: January 1, 2024

Category: Blogs,Mortgage Tips & Advice

ONE SMALL CHANGE CAN MAKE A HUGE DIFFERENCE ( a little longer of a read, but I promise it’s worth it)

As you know (from reading my updates 😉 ), more than 60% of all mortgages will be renewed between 2024 and 2026, so we need to plan if you have not already done so.

Today, I want to focus on ONE THING. Make one of the small changes below, and you will see a difference at renewal. 

Let me make it easy and give you a list of things to pick from – focus on ONE…unless you are a superstar and want to do more.

ONE is the MINIMUM REQUIREMENT. 

  1. Payment Frequency: Change to accelerated bi-weekly or accelerated weekly payments to help you pay the mortgage off faster.  
  2. Pre-Payment Privileges: Use your pre-payment privileges now while your rate is lower and pay off more of the principal. 

I feel very strongly about this advice, and as they say, the proof is in the pudding; read below to see for yourself. 

Let’s look at a scenario.

$380,000 starting mortgage value in 2019 

$1,597 monthly payments ( $798.13 accelerated bi-weekly) 

Five-year term, 30-year amortization. 

Monthly Payment & NO Pre-Payment Privileges Utilized

If you make monthly payments and do not utilize your pre-payment options, your balance at the end of five years will be $337,669, and your amortization will be 25 years at maturity. 

Accelerated Bi-weekly Payment & NO Pre-Payment Privileges Utilized

If you change to accelerated bi-weekly payments and do not utilize your pre-payment options, your balance at the end of five years will be $329,001, and your amortization will be 21 years, six months at maturity.  

Accelerated Bi-weekly Payment & 15% Increase in Bi-weekly Payments Utilized

Suppose you change to accelerated bi-weekly payments and utilize your pre-payment options by increasing your payment by 15% ($119.72 bi-weekly). In that case, your balance at the end of five years will be $312,233, and your amortization would be 16 years, seven months at maturity.  

Accelerated Bi-weekly Payment & 15% Increase in Bi-weekly Payments Utilized with an Additional $5,000 Annual Payment Utilized

If you change to accelerated bi-weekly payments and utilize your pre-payment options by increasing your payment by 15% ($119.72 bi-weekly), adding an additional payment of $5,000 each year, your balance at the end of five years will be $306,439.49, and your amortization would be 16 years, two months at maturity.  

As you can see, there is a sweet spot: Accelerated Bi-weekly Payment & 15% increase in bi-weekly payments utilized; this will help you reduce your amortization by nine years and your mortgage amount by $25,436. This is huge! So please use your pre-payment privileges now to pay off your mortgage faster, and there is a secondary bonus. 

When your mortgage comes up for renewal, you are already used to making higher payments, and you are less likely to feel the rate increase as much as someone who has yet to use this strategy.  

If you want to review your scenario, please schedule a call and let’s get you one step closer to paying off your mortgage faster. 

Book a time to connect

Mortgages can be complicated; we are here to help you make “cents” of it.

We focus on Mortgage Solutions, Period!

To learn more connect with Ana Cruz 905.870.0513 or email at ana@askanacruz.ca