Friday, January 25, 2013

Mortgage Pre-Payments

Jordan and I secured our mortgage just prior to the Canadian Governments move last year to reduce the maximum mortgage amortization from 30 to 25 years.  While right from the beginning, we knew we wanted to pay it off faster - the flexibility of a 30 year amortization meant we could adjust our payments to reflect our life circumstances higher or lower (within the confines of the mortgage agreement).

Our total mortgage financed was  $348,818.31 - monthly payments based on a 30 year structure, (5 year fixed) at 3.39% would have been $1,540.44 - our minimum.

Most of you know, that we chose the accelerated weekly option - $385.11/week.  Four months out of the year, there is a fifth week which reduced our amortization, and interest costs significantly.

Our 2013 plan is to finish our back yard and our 2014 plan is to pay off our car - but with all my posts lately about saving money, I couldn't help but look into the future about the impact of adjusting our weekly mortgage payments.

The calculator on my mortgage holder's website lets me review four different scenario's at one time.

The first - just by increasing our weekly  payments by $9.89/week - would shave another two years off of our amortization schedule.  $10 = 2 Years!

Going further you can see that by maximizing our pre-payment schedule, we could increase our payments by as much as $55.77/week to reduce our amortization to just under 17 years.  Jordan and I would be 45 years old!  Wowza!

While I don't think we're ready to come up with the extra funds before the escape is paid off (it's at a higher interest rate anyways) - I know that within the next 3-5 years, we're going to be able to make some serious changes to our mortgage and be mortgage free before we're 50!  Incredible!

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