|I've updated the line on my wall!|
I love the option that my mortgage has. In fact I would council anyone who is shopping for a mortgage, especially if it’s a closed one, to look for extra pay off features. It was a huge selling point for me when I was looking for a mortgage and I ended up going with the bank that offered three separate pay off options that I use.
1. I am allowed once every 12 months to pay a lump sum, up to 10% of my initial mortgage, directly against the principle.
2. Once a year I am allowed to increase how much I pay monthly by 10%. So I went from an initial mortgage payment of $646.62 to $711.28 every month. Next November I can increase it by another 10% to $782.41 a month.
3. I can double up my payments every month. So at the moment every month I am paying $1,422.56 ($711.28*2), the second half of the payment goes entirely towards principle.
The other feature offered at my bank, which I do not use, is an accelerated payment schedule, allowing you to make mortgage payments weekly, or bi-weekly, which results in a couple more payments a year than if you pay monthly. I have stuck with monthly payments since I am paid monthly and it makes the record keeping a lot easier. Add to that the fact that I am making loads of extra payments so I can afford to go monthly.
Going with a bank that offers all, or a number of these options will allow you to pay off your mortgage a good deal faster, and result in a lot less interest. That said I would not recommend that you put money towards your mortgage that you may need later. I do have access to part of the equity in my home; at the moment my line of credit that is secured by my house has $19,955.21 available. However, the interest rate on any money that I borrow from this line of credit is higher than the interest on my mortgage. There is no point paying off a debt that costs you 3.09% only to borrow that money at prime plus 0.5 (currently 3.5%). You will be paying more in interest and will be vulnerable to changes in the interest rate. Before I make an extra payment against my mortgage I make sure that I have a solid emergency fund, that I have enough set aside to cover my expenses for a month, and that I have saved something for my retirement.