Majority of lenders will have prepayment options that allow for contributions in addition to regularly scheduled mortgage payments. Here are the most common ones:
Annual Lump Sum Payment:
- A lump sum of 10- 20% of the original mortgage amounts each year
- Applied directly to the principal balance.
- Minimum payment amount: Usually $100.
- Some lenders only allow a lump sum payment on the mortgage anniversary date.
Payment Increase:
- Most lenders will allow an increase of the regular payment by up to 10-20% once per year.
- Increased amount reduces the principal balance.
Double-Up Payment:
- Make two regular mortgage payments on the same date.
- Can be done on any or all payment dates during your mortgage term.
- Extra payment directly reduces your principle.
Accelerated Payment:
- Pay 13 months of payments in 12 months.
- Increase each mortgage payment slightly throughout the year.
- Speeds up the process of paying down your principal faster.
A small change can go a long way and greatly reduce your amortization. Look into your lenders’ prepayment options so you can be mortgage free sooner.
