Eliminate Your Mortgage Sooner

Mortgage pre-payment privileges not only allow you to make annual lump sum payments, they also allow you to increase the amount of your mortgage payment each year.  These pre-payment privileges are usually described as 15% + 15% or 20% + 20%.  The greater the percentage the more you are allowed to increase your regular payments.  There are two numbers given because the first is the annual lump sum percentage and the second is the amount you are allowed to increase your regular payments.

Your payment frequency will not impede your ability to increase your payments.  If your mortgage payments are $1,000 every month then a 15% privilege would allow you to increase that to $1,150.  Similarly a $250 weekly payment could be increased by 15% to $287.50.

The benefit of increasing your payments of course is the reduction in your amortization period or the number of years until you can burn your mortgage.  If you started with a $300,000 mortgage with a 25 year amortization and interest rate of 3.29% your payments would be $1,465 per month.  If after the first year you increase your mortgage payments by 15% to $1,684 your amortization would drop from 24 years to 19 years and 7 months.  This is a dramatic impact and from only one payment increase.

Both pre-payment privileges offered by mortgage lenders will shave significant time from the duration of your mortgage and save you a small fortune in interest.  The challenge is not getting a better privilege, the challenge is using the privilege you already have.

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