By Roberto Sanabria Mortgage Broker with Centum National Mortgage Loans Inc.
Everyone who has a mortgage is aware that the faster we pay down the mortgage, the less interest he/she will pay during the life of the mortgage. Many people may interject that there is no rush to pay down the mortgage since rates are at all time low, in my opinion, this is the best time to pay it down. But, certainly before thinking on paying down the mortgage, you must consider a few things and most of all, get that commitment from your family to follow that strategy. Try to avoid situations where you accrue high debt in credit cards (at 11% or higher interest rate, that compounds monthly) and also "save" a similar amount in the bank or RRSP (at 1% ROI), this calls for a negative type of wealth management, not OPM (Other's People's Money).
Did you know that by just adding extra $700/month (during the course of 1yr) to a mortgage payment of $1900/month (total mortgage amount of $350,000 at 5.15% rate fixed 5yr, which is the average fixed rate in last 10 yrs in Canada) you are cutting interest by $158,353? Mathematically speaking, an investment of $8,400 will reduce your mortgage interest in $158,353 by reducing amortization from 30yr to 17yr (if you keep on doing it same amount each year)...that is huge ROI...
I know you will say "well I do not have the luxury of having extra $700 per month laying around to do the pre payments", but you will be surprised to know it is doable with some planning and discipline at least some amount that your situation will allow, which will go a long way saving you in interest..in the end, the amount was just an example for ilustration purposes. Here is the best thing, to find the extra money is almost effortless, you just need to learn the system and how to leverage the structure I can create for you and your budget.
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