INCOME TAX REFUND – WHY NOT TAKE ADVANTAGE OF YOUR PREPAYMENT OPTIONS AND APPLY IT TO YOUR MORTGAGE?
It might not be sexy but prepayment options can save you thousands!
So you’ve received your income tax refund – now what?
Take a quick trip south, buy a new lawn mower, treat yourself to a spring wardrobe, your options are plenty!
Our suggestion would be to put it against your mortgage. Finding the best mortgage for your individual needs is only one of the services we provide, we’d also suggest taking advantage of the excellent features your mortgage offers. The lenders we work with have great prepayment options that can reduce your mortgage substantially. One option available is to double up your payment.
On any regular payment date, you can double-up your payment of principal and interest. The full amount of the extra payment is applied directly to the principal of your mortgage.
Example
Paying just one double-up payment each year on a 25-year mortgage could allow you to be mortgage-free 3 years sooner, and save almost $22,500.
Here are some other prepayment options one of our lenders (First National) offers.
ANNUAL 15% LUMP SUM PREPAYMENT
Every year* you can pay up to 15% of your original mortgage balance on any of your regular payment dates. This payment is applied directly towards your principal and helps you become mortgage-free sooner. There is a minimum prepayment amount of $100.
Example
Making an annual $2,000 principal prepayment on a 25-year mortgage could allow you to be mortgage-free 4.5 years sooner.
ANNUAL 15% PAYMENT INCREASE
Once per year*, you can increase your payment amount by up to 15%. The increased amount will apply directly towards reducing your principal balance. Some exceptions apply, so you will need to review your mortgage documents or let us explain your prepayment options.
Example
If your monthly payment is $1,341 and you increased it by 15% to $1,542, you could save $34,704 over the life of your mortgage.
So if you’ve got some extra cash in your jeans why not take advantage of a prepayment option – you’ll notice it in the long run.
* An anniversary year begins and ends with the date your mortgage was advanced or renewed.
** Examples are based on a $250,000 mortgage with a 5 year mortgage term, rate of 4.19% and a 25-year amortization period. They assume a constant interest rate throughout the amortization period, compounded semi-annually, not in advance. All figures are rounded to the nearest dollar.
