As a UBC Realty agent, I am consistenly asked by prospective homeowners about how they can save money on their mortgage.
Here in this week's UBC real estate blog, I would like to share 8 Money-Saving Mortgage Tips for homeowners in the UBC area:
1. Increase your payments towards your UBC home to the most you can afford. The upside is that most lenders will allow you to reduce the payment to its previous level if it turns out to be too great of a burden or if your circumstances change.
2. Utilize your RRSP-driven tax rebate as a mortgage pre payment method. Even if you can only prepay annually, make sure your tax refunds are set aside for paying down your UBC real estate mortgage. Many Canadians borrow (at prime) to buy an RRSP to ensure the maximum rebate. When applied to the mortgage principal, the resulting refund is a “gift that keeps on giving.” Combining the refund with the tax-free interest earned on the RRSP over the subsequent years will quickly outpace the short-term interest costs of the RRSP loan.
3. Increase the frequency of your UBC home payments. Make accelerated bi-weekly payments to get a “free” principal reduction equivalent to one full mortgage payment every year.
4. Increase your UBC home mortgage payments a set amount. Round up your payments by adding even a nominal amount of say $10 per payment; the amount of interest you can save is unbelievable. At the end of the month you won't "feel" that small contribution (the old "for the price of a latte" scenario) but your interest will - you win!
5. Use your pre-payment privileges when mortgaging a UBC Home. Make use of double-up privileges where possible. Tell yourself that you will “skip-a-payment” whenever necessary…then skip only when you absolutely must.
6. Take advantage of your lump sum payments when available. Pay a lump sum towards your UBC realty purchase whenever possible to decrease the principal of the mortgage. Your regular payments will not be allocated as much to interest, which will accelerate the end of your mortgage.
7. With your annual income increase – consider increasing your UBC home mortgage payments. Raise payments in line with increased income on an after-tax basis. You've adjusted perfectly well to your lifestyle on your past income so why not speed up the process on completing your mortgage? Sure, the extra disposable income may be fun to spend in the short-term, but the long-term benefits of being mortgage-free at a quicker pace definitely outweighs the immediate "sacrifices".
8. Stabilize your UBC real estate mortgage payments even when interest rates drop. Keep payments the same when mortgage rates have fallen if the payment amount has not been difficult to maintain thus far. Then, keep it the same, thereby paying down the principal faster.
I hope you found these Money Saving Tips for UBC real estate purchaces helpful. Of course there are many things to consider when planning to purchase UBC realty and that is what I am here for. Contact UBC Homes today and find out how pleasant I can make the experience of buying a home in the UBC area for you and your family.