Another hockey season starts today and I have two predictions: Vancouver and Edmonton won’t make the playoffs…although I’m more certain about the Oilers than the Canucks… and we’ll get another massive wave of 95,000 Scotiabank commercials…in the first week… I can’t help the Canucks and my Oilers, but I can help you with one of the main Scotia commercials.
Last year, one of the always-played commercials was a lady pulling into her driveway and a marching band came out and played. She actually paid off her mortgage – and that’s something so few people do in a given year. The tag line was to come see Scotia to learn how to become mortgage free.
Well, you don’t actually need to do that. I’ll give you the scoop on what an appointment with them will get you in less than their 30-second commercial time.
-Shop around and get at least three quotes when your mortgage is up for renewal. They can vary by up to half a percent or more.
-If rate shopping gets you a lower rate, don’t lower the payment – shorten down the time you have left on the loan.
-Set it up for weekly payments if you can possibly afford it.
-Take advantage of your 10 or 20% prepayment privilege each year if you have a few thousand dollars.
-If you can swing it, go in and get your payment increased 10 or 20% right now. It’s not a lot, but it’ll add up to a lot.
That’s it – it really is that simple. If you do one or two of these five things you’ll be mortgage free much faster than 90% of people who are on the forever plan and a ton of people in their 50s or older who aren’t going to live long enough to pay off their home.
Getting your rate down by half a point on just a $200,000 balance will save you $1,000 a year. But, instead of dropping the payment and leaving your loan on the forever plan, just cut two or three years off the term. You’re used to paying a certain payment, so don’t think you’re saving or gaining anything if you take a lower payment.
Changing from monthly to weekly payments has the effect of paying 13 payments a year. That’ll cut the typical mortgage down by four to five years – and that’s a lot of time saving!
Lastly, almost all mortgages let you prepay up to 10 or 20% a year without penalty. If you have a bonus, a tax refund, or some money – dump it on there. It cuts the length of time by a lot. Leave the payments the same and any online calculator can show you the huge interest savings it’ll create. That’s assuming you don’t have any debt that’s at much higher rates. If so, those balances are way more of a priority.
But the best way to be mortgage debt free is still to sell your expensive home and purchase a cheaper one. Less price equals less mortgage. Unfortunately, that’s something very few people would consider…