Buying a home is a major purchase that most people pay off over a long period of time. However, certain easily accessible choices can help you save on interest and speed up your mortgage repayment. Here are five tricks to pay off your National Bank mortgage more quickly.
- Increase the frequency of your payments
This option is often considered the easiest option to incorporate into a budget. Simply increase your payment frequency from monthly to weekly or biweekly. And why not time your mortgage payments to coincide with when your salary is deposited?
Increasing the frequency of your billing cycle means you will make 26 payments per year and therefore pay off your loan more quickly.
By reducing the length of the repayment period (amortization period), the principal will be paid off more quickly and, as a result, the interest portion will also be reduced.
The following table shows the impact of different payment frequencies on a $200,000 hypothetical mortgage at 5% interest with an initial amortization period of 300 months (25 years)[1].
|
Payment amount |
Total amortization |
Interest paid |
Interest saved |
|
| Monthly payment
(12 times a year) |
$1,163.21 |
25 years |
$148,962.99 |
– |
| Accelerated biweekly payments
(26 times a year) |
$581.60 |
21 years and 6 months |
$124,094.84 |
$24,868.15 |
| Accelerated weekly payments
(52 times a year) |
$290.80 |
21 years and 5 months |
$123,822.54 |
$25,140.45 |
The above table shows calculated interest assuming that the rate does not change for the duration of the loan.
In this example, accelerated payments would save you approximately $25,000 and shave close to 3 1/2 years off your amortization period!
- Make an additional payment
If you get a raise, finish paying off a debt, or gain other additional leeway in your budget, why not make an additional payment in addition to your regular one?
You are allowed to make an additional payment on principal each time you make a mortgage payment. This directly reduces the principal on your loan, but cannot exceed the amount of your regular payment (principal and interest).
- Increase your payment amount
Your budget has seen a major improvement? Each year, you can increase the amount of your mortgage payments by an amount up to the amount of the previous regular payment.
This can only be done once per calendar year and it’s important to make sure that you can then sustain this new payment amount because once modified, you will be bound to this amount for the remainder of your term. Naturally, when your term expires, you can return to the initial payment amount.
- Make a lump-sum payment
If you’ve recently received an income tax refund, an inheritance, insurance benefits, lottery winnings or another substantial amount of money, why not seize the opportunity to make a lump-sum payment on your mortgage?
If your loan has a closed term, you can repay up to 10% of the principal amount each calendar year at any time. You can do so in a single payment or spread it out over the year[2].
When your term expires, you could of course reimburse any amount you wish before the beginning of a new term (renewal of the loan).
National Bank therefore offers you the chance to make a lump-sum payment, and increase the amount of your mortgage payments.
- Choose the All-In-OneTM,3
The All-In-OneTM is a financing solution that allows you to enjoy flexibility in your payment amount and frequency.
Thanks to this flexible payment structure and the penalty-free additional payment option on the margin portion of your loan, the All-In-OneTM allows you to adjust your payments according to your budget.
The All-In-OneTM mortgage offers you an interesting way to manage your finances. It allows you to use the net value of your home as security in order to access your repaid principal at any time to help carry out your projects without having to apply for additional credit.
You can therefore bundle all your financing needs, all the while having access to your funds at all times. This multi-account concept allows you to have a complete overview of your financial situation, and to monitor each of your projects separately.
Within your reach!
In summary, there are many simple ways to help you reduce the amortization period of your mortgage, and pay off your loan more quickly.
To learn more, please contact the Mortage Development Manager assigned to your office.
[1] The data in this example are assumptions only and do not create any legal or contractual obligation for National Bank.
[2] Accrued interest will be charged if the payment(s) are not made on the regular payment date.
TM National Bank All-In-One is a trademark of National Bank of Canada.
3 Subject to credit approval by National Bank. A maximum amount equivalent to 65% of the value of the property may be in the form of a line of credit, and the rest of the funding has to be in the form of a mortgage loan. For example, if the value of the property is $100,000 and you have an amount of $20,000 available for down payment (20% of the value of the property, which is the minimum required), the authorized credit limit of the All-In-One will be $80,000. However, of this $80,000, up to $65,000 will be in the form of a line of credit and the rest will be in the form of a mortgage loan.
