Want to pay your mortgage down faster? You can, but here’s what you need to know
Dear Ross, we have a quick question about paying back the mortgage. I know for a closed mortgage you’re penalized if you pay it back before the end of the term, but I know there is a certain allowable amount you can prepay per year. Can you tell me what that is?
I think my previous research had shown me you can opt to increase your monthly payments or make random lump sums. We won’t be planning on making major lump sums for repayment but I was just curious to plan for how quickly we can attempt to pay it off. Thanks.
Most lenders I deal with you can increase your monthly payments up to 20% of the initial payment. You can also make one lump sum payment of up to 20% of the initial mortgage amount once per year.
Some companies you can only prepay 15% per year, and some of the “no frills” low rate mortgages out there are very restricted – like only prepay if you sell, not refinance, and very limited, if any, prepayment privileges, but I have no plans to put you in one of those.