A great way to save on interest costs and reduce the life of your mortgage is by making annual principal payments.
- If you choose a closed mortgage, you may prepay up to 10% of the original principal amount of your mortgage once in every 12-month period. The prepayment is applied directly to the principal of your mortgage.
- You may also Double Up your regular mortgage payments (of principal and interest).
- You can make a principal prepayment of $500 or more to your open mortgage as often as you like!
- Plus, you can make principal prepayments of any amount you wish on your mortgage principal at renewal time.
- A principal prepayment of $2,000 a year can make a substantial difference in the time it takes to pay off your mortgage. Take a look:
Example: $80,000 Fixed-Rate Mortgage at 8.00%1
|Monthly payments and 25-year amortization||Effect of $8,000 principal payment|
|Mortgage repaid (years)||25||16.3|
|Total interest cost2||$103,165||$79,873|
|Interest savings2 vs. 25-year mortgage||N/A||$23,292|
Calculated, semi-annually not in advance.
Over the life of the mortgage, assuming constant interest rate throughout amortization period.