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Maximizing Your Prepayment Privileges

Each commitment letter allows us to prepay our mortgage anywhere from 10 to 20% depending on the lender.  These prepayment privileges are in addition to your right to pay your mortgage payment quicker than a traditional monthly payment. You can pay semi-monthly, bi-weekly accelerated, or weekly accelerated.

It is believed that if you have available 20%  of the purchase price for the down payment, that this is the best option to save you money.

Below is a comparison usinga down payment of 20% versus 5% and then maximizing on your prepayment privileges.

For the example, we have used the following details:

Purchase Price of $300,000

Interest rate of 3.56% for a 5 year term

Amortization 25 years

Payments made bi -weekly accelerated

Down Payment available is $60,000, which is 20% of the purchase price.

Scenario 1 shows you putting the full 20% at time of purchase:

 

Mortgage Amount: $ 240,000.00 Payments Displayed: 1 – 130
Interest Rate: 3.560% Payment Frequency: Accelerated Bi-Weekly
Amortization Period: 21 Year(s), 11 Month(s) Initial Payment: $ 602.93

Period

Total Paid

Interest

Principal

Balance

Year 1

1 – 26

$ 15,703.18

$ 8,327.24

$ 7,375.94

$ 232,624.06

Year 2

27 – 52

$ 15,702.18

$ 8,063.09

$ 7,639.09

$ 224,984.97

Year 3

53 – 78

$ 15,702.18

$ 7,789.51

$ 7,912.67

$ 217,072.30

Year 4

79 – 104

$ 15,702.18

$ 7,506.09

$ 8,196.09

$ 208,876.21

Year 5

105 – 130

$ 15,702.18

$ 7,212.50

$ 8,489.68

$ 200,386.53

Totals:

$ 78,511.90

$ 38,898.43

$ 39,613.47

 

Your mortgage payout after 5 years is $200,386.53.  Your mortgage is paid off 21 years, 11 months based on bi-weekly accelerated payments.

 

Scenario 2 shows you putting 5% down, which is $15,000, and you paying  your mortgage insurance premium.  After you have taken possession of your real estate, you put the remainder of your original$60,000; $45,000 as a lump sum deposit which representsyour  15% prepayment privilege allowed by the lender.  Any lump sum deposit  goesstraight to your principal mortgage amount.  Not a penny is applied to your interest.

 

Mortgage Amount: $ 292,837.50 Payments Displayed: 1 – 130
Interest Rate: 3.560% Payment Frequency: Accelerated Bi-Weekly
Amortization Period: 17 Year(s), 4 Month(s) Initial Payment: $ 735.67

Period

Total Paid

Interest

Principal

Balance

Year 1

1 – 26

$ 64,153.42

$ 8,611.96

$ 55,541.46

$ 237,296.04

Year 2

27 – 52

$ 19,153.42

$ 8,171.36

$ 10,982.06

$ 226,313.98

Year 3

53 – 78

$ 19,153.42

$ 7,777.99

$ 11,375.43

$ 214,938.55

Year 4

79 – 104

$ 19,153.42

$ 7,370.59

$ 11,782.83

$ 203,155.72

Year 5

105 – 130

$ 19,153.42

$ 6,948.58

$ 12,204.84

$ 190,950.88

Totals:

$ 140,767.10

$ 38,880.48

$ 101,886.62

 

Your mortgage payout after 5 years is $190,950.88and by making your mortgage payments on a bi-weekly accelerated basis, you will pay off your mortgage in 17 years and 4 months.

 

The difference between these two scenarios represents a savings of $9,435.65.

For more information on your mortgage options, please contact Elise Hildebrandt, AMP Broker Lic #316103 with The Mortgage Centre, Brokerage Lic # 315847 at 306-221-2373

 

   

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