How Often Do You Do It?

When it comes to your mortgage are you doing it once a month?  Most Canadians make monthly payments on their mortgage but doing it more often can make a big difference and save you lots of money and put a great big smile on your face!

You've heard that splitting your payment, making extra payments, - whatever you want to call it - can make a big difference on your mortgage and it's true.  It's not magic and it's certainly not a gift from a lender.  It's your sacrifice that makes the difference but it's an easy one. It's called a "Bi-weekly accelerated" payment and you need to ask for it by name.  "Bi-monthly" is not the same and "weekly" is a waste of your resources.  Here's how it works:

For this exercise you will need a calendar.

 Circle the day each month your payment comes out on.  Now change your payment to bi-weekly which means you will pay every second Friday.  Now you're making 26 payments and if you divide that by 2 you will see you have actually made 13 monthly payments.  That one extra monthly payment every year will take a typical amortization down 4 - 5 years. A "Bi-Monthly" payment means you are making your payment twice each month let's say on the 15th and 30th.  That's the equivalent of 12 monthly payments.  "Weekly" mortgage payments will give you the same number of payments as a "bi-weekly accelerated" and if your bank charges you for each transaction from your account then it certainly is not as efficient. 

Here's a link to the Canadian Mortgage and Housing Calculator where you can try it out.  In order to use this calculator you will need a bit of information on your existing mortgage.  See my previous blog post.

I think once you work through this exercise you will agree that the more you do it the richer you will be.

Happy Savings!.