Most Canadians really don’t fully understand how mortgages work. It is easy to focus solely on the interest rate and that’s basically for two reasons. First is people believe the interest rate is the most important factor in determining the amount of interest they will pay, which is not true. Secondly Canadians have been told to find a mortgage with the lowest rate. Interest rates obviously have a bearing on the amount of interest you pay, however the frequency/amount of your mortgage payments are far more significant.
Example: A $300,000 mortgage amortized over 30 years and a payment of $1,300 would cost $168,148 in interest over the life of the mortgage. The same $300,000 with biweekly accelerated payment of only $750 would cost only $114,230 in interest and be paid in full almost 9 years sooner. That’s an interest savings of $53,900 and not to mention the 9 years worth of mortgage payments that won’t be spent. Both these mortgages are drastically different in every respect except the interest rate (3.24%).
As you can see there is a lot more to mortgages than interest rate. Taking steps to pay off your mortgage sooner especially during these times of low interest rates only make sense. Your mortgage is as unique as you are and being informed and knowledgeable about your mortgage is the only way to ensure you make the right choices.
Call or email me today and let me show you how mortgages really work. One call could easily save you thousands of dollars and years off your mortgage.