Chapter 15 – Prepayment Options
Depending on the lender, you will have a variety of prepayment options available to you. Using these options is a great way to reduce the principal on your mortgage and save money. Check with your mortgage broker to see which ones are available to you.
Here are some of the standard prepayment options:
Lump Sum Prepayment:
Every year, you can pay back a certain amount (usually 15 or 20% of the original mortgage). In the past lenders required the lump sum to be made once per year (On the Mortgage Anniversary). Now, with better technology at the banks, they can now accept these pre payments on top of any regular mortgage payment (weekly, biweekly, monthly or semi monthly).
Increase Payment Amounts:
Most institutions allow you to increase your payments by a percentage once a year (ie: increase each of your payments by 15%).
Double Up Payments:
This option allows you to double your payment at any given time.
Once you feel comfortable with your mortgage payments, it is generally a good idea to take advantage of these options. Here is a more recent post about mortgage prepayment privileges.