Hypotheque - Save Big Bucks on Your Mortgage
By Mark Steed
There is a simple trick that you can use to save thousands of dollars on your mortgage - hypotheque, without making any adjustment in your monthly payment. It is a simple but powerful solution that not many people are aware of. - Hypotheque
A two week pay check is the rule for most people. Because of this, we feel fairly rich at the beginning of this two week period, but hard up at the end. Yet, if you look at your expenses, they seem to remain relativelyfairly fixed.
When we feel full of money, we pay the bills and buy the necessities and then bills that come in later may not get paid. The answer to this dilemma is to budget our money, and one of the most valuable and easiest ways to do this is to pay your home loan (pret hypothecaire) every two weeks instead of once a month.
This is an easy idea that will save the home owner substantially, and have the added benefit of paying off the mortgage earlier. Let us use a case of an $80,000 fixed, 30 yr, 7% mortgage-about $25,000 may be saved on such a mortgage using this system.
How to pull this off- budget your mortgage payment out of each pay packet instead of the last one of the month. (This is what the majority of people do, in order to make the first of the month due date.)
There is no real enigma to this: as you pay your mortgage earlier and faster, you bring forward the eventual due date of the loan.
When the mortgage is paid off earlier, the interest total is less.
Because of the way mortgage interest is determined and paid down, most of your initial mortgage payments are allocated to pay interest, and only a small portion goes to principal. So you mostly pay interest, at least at the outset of the mortgage. But if you can speed up the amount of payments, the principal portion that is paid starts to increase faster. The end result is that the principal is paid down earlier!
Your bank may have a designated form for this type of transaction, but even if they don’t, just send your money in with your mortgage number clearly marked on it. You might even consider making extra copies of your mortgage payment coupons and just adjusting the date on them.
You pay exactly the same amount on your home loan (pret hypothecaire) each month, but because you pay half of it ahead each month, you reap the dual benefit of saving tens of thousands of dollars in interest, and you will pay your mortgage down earlier.
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