So I was inspired by a recent article on canadianmortgagetrands.com titled “A Little Extra” and they talked about how increasing your monthly mortgage payments by $20 can save you a substantial amount of money over the span of your mortgage. The article was a little vague, but I wanted to prove that their theory was correct and show you exactly how you are saving money by increasing your mortgage by $20.
Here is the Breakdown:
If you were to have a $300,000 mortgage at a interest rate of 2.99% for 25 years your monthly payments would be $1420. After 14 months you would still owe $290,366. At this point if you were to increase your monthly payments by $20 for the remaining portion of your loan you will save over $2,000 on interest paid and reduce your mortgage amortization by 6 months. Yes if you paid $20 extra it would be an investment of $5,720 over 286 months but your savings would be $2,800 +$2,000 interest savings, totalling $4,800.
Think about what you spend $20 on in a month that you don’t really need:
- Junk food
- Drinks out
- Fast food
- A six pack of beer
- Bottle of wine
- Coffee
- Going out to a movie
There are benefits to increasing your mortgage payments. Even as low as $20. Make sure you are with the right lender that allows you to increase your mortgage payments by 20% and make lump-sum payments by 20% per year towards your outstanding principal. If you have any questions feel free to give me a call.
All the best and have a great weekend.