3 simple steps to save money on your mortgage that anyone can do
When it’s time to get financing for your condo purchase, everyone will look for the cheapest mortgage or ways to reduce monthly payment without increasing your down payment.
I personally got my first mortgage through Ratesupermarket.ca which helped me save more than 0.5% on my interest rate at the time. So I wanted to share 3 simple steps to save money on your mortgage that anyone can do alone :
Compare mortgage rates
Talk to your bank AND compare with others lenders. The easiest way to compare interest rate is to go online and make the comparison. This will give you a clear idea where you could potentially negotiate and end up.
My experience tells me that bank rates are usually higher than mortgage brokers and this is why I always get financed with a mortgage broker instead a bank.
On a $ 300,000 example with 25 years of amortization this could save you up to $ 34,907 by doing this first step.
Choose bi-weekly accelerated payment
There are classic 3 ways to pay your mortgage:
- Monthly : 1 payment/month equals 12 payments/year.
- Semi-monthly : 2 payments/month equals 24 payments/year.
- Bi-weekly accelerated : 1 payment/2 weeks equals 26 payments/year.
If you have a regular pay check every 2 weeks, it is better to make smaller payment and have cash-flow you can use that one big payment and wait for the second pay check 2 weeks later.
On the $ 300,000 example below, this easy step can save you up to $ 19,887 of interest fees and can cut 2 years off your mortgage.
Make an annual lump sum payment
You might think that not anyone can put their tax return or their big commission sales into their mortgage.
However if you can pass on 17 lattes a month or save $ 83.50/month, this could save you an extra $ 1,000 per year. By doing this over 20 years, it will save you $ 10,747 on interest fees.
Save a total of $ 65,541
This equal to one and a half year of salary or 1000 Cuba all inclusive trip (of average $ 655 each)