Don’t leave money on the table
Banks and mortgage lenders send out mortgage statements annually at this time of year. Some people put them in the trash, while others file them away neatly. Smart borrowers, however, submit them to their mortgage professional for review.
For example, a homeowner who has a $250,000 mortgage could save $10,000 to $15,000 or more over the next five years by taking advantage of lower interest rates and switching to a variable-rate or a lower price fixed mortgage.
Or, a homeowner whose income has increased could reduce their amortization by increasing payments. A 15 per cent increase in payments will typically go unnoticed on a daily basis, but can reduce a mortgage’s amortization by almost five years.
The secret to paying off a mortgage faster is reviewing it annually and making slight changes that reap huge rewards.
For example, my wife and I review our mortgage annually. If our income increases, we increase our payments. If interest rates change, we adjust accordingly.
If we are faced with the choice between making an RRSP contribution and making a lump sum mortgage payment, we do both. By making an RRSP contribution, we are able to apply the refund to our mortgage principal, which give us the best of both worlds.
Our annual mortgage review has reduced our own amortization from 30 years to 15.
What surprises us is how few people actually review their mortgage each year. Even though most people make annual visits to their financial planner, dentist and doctor, they let their largest financial instrument go unchecked – even though a mortgage checkup is far less invasive than a physical.
Most mortgage professionals will provide a review as part of his or her service. It is important however, to make sure your mortgage professional is an independent service provider who does not work for a specific bank. Knowing all of the products on the market is necessary when it comes to determining the suitability of your mortgage.
Reviewing your mortgage is easy. Go to www.mortgagecheckup.ca and submit your mortgage statement for review. Mortgage360 will generate a simple report that will outline steps that are guaranteed to save you money.
The service is free, and only takes five minutes. And if you submit your mortgage statement by Feb. 28, I will review it personally.
Also, Mortgage360’s next Cash Flow Club meeting is Feb. 24th. Go to mortgage360.ca/cash-flow to register.
Nolan Matthias holds a bachelor of arts in Economics, is the co-founder of Mortgage360 and the author of The Mortgaged Millionaire. Call Nolan at 403-615-6132 with your questions or to set up an appointment with an Accredited Mortgage Professional (AMP).