Getting the Mortgage Monkey off your Back.
Owning a home is one of the most common ways to build equity and wealth. This process usually involves a mortgage. While the length of this loan might seem intimidating, it is possible to pay it off early depending on your circumstances.
When looking into mortgages ask your lender if you will face a penalty by paying off your mortgage early. Each loan has specific prepayment privileges. Many plans limit the amount you can put toward a prepayment. If prepaying is a priority to you, you may want to consider a more flexible type of mortgage. Here are two main types of mortgages.
OPEN MORTGAGE CLOSED MORTGAGE
Higher interest rates Lower interest rates
More prepayment flexibility Strict prepayment privileges
Ability to renegotiate at end of your term More likely to face prepayment penalty
Freedom to change lenders before end of term Limitations vary per lender
4 strategies to pay off your mortgage early
1. Bi-weekly payment plan-paying on an accelerated bi-weekly payment plan saves you interest over time.
2. Increase your payment amounts-this can save thousands in interest and shave a few years off your mortgage.
3. Pay a lump-sum-your contract may limit how much you can pay and what time.
4. Keep the same monthly payments when you renew-Even if your new rate is lower, pay the same monthly amount if you can afford it
If you are ready to pay off your mortgage early, but want to avoid a prepayment penalty, consider these two options
1. Port your mortgage-if you are moving, take your existing rate, terms and conditions with you to your new home.
2. Shop around at the end of your term for a more flexible lender.