How To 'Cheat' On Your Mortgage

By: Thomas Cook

How To 'Cheat' On Your Mortgage

Typically, when a person talks to their banker about mortgages, most often the discussion revolves around having a standard monthly payment with an amortization of 25 years. For a $400,000 mortgage at a 2.5% interest rate, that would mean your mortgage would be paid off in full by the end of the 25th year!
 
However, it also means that you would have paid the bank back $548,000 over that 25-year period. $400,000 in principal loan repayment AND $148,000 in interest payments!
 
There are several, almost secret, options available which will reduce the total interest you pay and in one case substantially reduce the interest paid by over $40,000 in the above example.
 
First off, let me say this. Almost every bank has these options but they aren’t usually talked about unless you ask questions. The sooner you can start increasing your principal repayments, both in size and frequency, the more interest you’ll save.
 
This is because any mortgage payment is comprised mostly of interest during the first five to ten years. However, any extra payments you make, over and above the regular payment, go directly to a reduction of the principal balance owing.
 
The first option that you can use is to change your payment method from monthly to accelerated bi-weekly. That means you take your monthly payment, divide it in half, and pay that amount EVERY 14 DAYS.
 
By doing this you will make 26 payments per year and reduce the amortization significantly down to 21.8 years and save you $32,000 of interest.
 
Don’t take the regular bi-weekly option where you pay on the 1st and the 15th day of the month… 24 payments during the year. This method DOES NOT shorten your amortization so we don’t recommend it at all.
 
Another option is to pay weekly… divide your monthly payment by 4 and pay that amount every 7 days… thereby making 52 payments during the year. This does shorten the amortization down to 21.5 years.
 
Since this is not a significant improvement from the accelerated bi-weekly option, we suggest just to stick with the ‘every 14 day’ payment schedule.
 
Many banks will also allow you to ‘double up’ your bi-weekly payment and also make lump sum payments annually totaling up to 10, 15 or 20% or more of the original principal amount.
 
You can take advantage of any of these pre-payment privileges without any penalty whatsoever.
 
You can also start off your mortgage with a shorter amortization. That means you will pay a higher monthly or bi-weekly payment but you WILL pay off your mortgage sooner and save lots of interest.
 
The only disadvantage with this is that if something happens to your income… you lose a job or get injured… you cannot then make the amortization longer to reduce your payments. You’re locked in.
 
We suggest that you set your mortgage up at the beginning for a 25-year amortization. Then take advantage of all the pre-payment privileges that you can!
 
The most dramatic way to save interest on your mortgage, and cheat the bank out of literally tens of thousands of dollars in interest, is to use our trademarked ‘Mortgage Terminator Program’.
 
This Program shows you how to pay your mortgage off in just 10 years… without you winning the lottery!
 
There are two simple steps… First make sure you’re making your payments accelerated bi-weekly which reduces your amortization to 21.8 years.
 
The second step is to increase your accelerated bi-weekly payment by 10% each and every year.
 
The best part of any of these options… they’re all legal and no special permission is required to invoke any of them!
 
Don’t pay the banks any more interest than you must.


Thomas Cook
Thomas@LivingInToronto.com
647-962-1650


Keep Up To Date With Toronto's Real Estate Market
 
Every month we communicate with our readers to give them accurate insights and statistics about what's happening in the Toronto and GTA real estate markets.
 
Subscribe to our free monthly FYI Newsletter HERE.

 

Here are 5 proven ways to move safely and smartly towards your real estate buying goal...

  1. Download a free copy of my Ultimate Home Buyer’s Guide book
Find out everything you need to know about buying a Toronto house or condominium. Instead of randomly searching all over the internet, jump start your home buying experience and get a wealth of expertise and experience in one place.

Download your Guide here
 
  1. Get a custom listings search set up for you and receive targeted listings daily
If this list is not specific enough for you, we can put together a custom list of homes.  Maybe you want only 2-bedroom condos in specific neighbourhoods, or only semi-detached houses, or even a certain school zone. 
 
We can set up your HOMEWatch search for any area you choose (not just downtown Toronto), and you'll get immediate access to homes within minutes of them being listed.  Just leave some search criteria here
 
  1. Set up a step-by-step plan with the best ways to get to your home buying goal
At the beginning of the home buying journey, often the picture of what the end result might look like is a little ‘fuzzy’.
 
Our first-time and move-up buyers have told us that being able to meet with us on a casual basis as early in the process as possible, even if their purchase date was 6-12 months away, really worked the best for them.

To arrange your no-obligation Starbucks Strategy Session, click here.
 
  1. Join us for a Market Experience Tour - pick your favourite neighbourhoods and price range
Start getting educated about what your condo likes and dislikes are. 
 
The Market Experience Tour is a great way for you to figure out which neighbourhoods and condo buildings are right for you, and you’ll also get a good sense of what’s available in your price range.
 
Pick the date and time you like to go on your Tour.
 
  1. Don’t start your home buying experience on the wrong foot - Meet for a Buyer Consultation first!!
Home buyers have come to us after trying to work with another agent saying “I don’t think he even knows exactly what I’m looking for and I’ve got questions he doesn’t have the answers to”.
 
Don’t make the same mistake.  Let’s set a time to meet and go over how the complete home buying process works, find out what your likes and dislikes are and what pitfalls you’ll want to avoid, before you seriously start looking for a house or condominium.
 
This is the best 90 minutes of time you’ll ever spend - set up your private Buyer Consultation.