# fastest mortgage payment options?



## Siwash (Sep 1, 2013)

Hello folks and happy new year,

Currently I am paying down my mortgage on a monthly basis - i.e., 12 payments per year. I would like to know little more about the fastest payments options available that others here have opted for. I see that there exists an accelerated bi-weekly and accelerated weekly. I am assuming that th weekly accelerated is the fastest way to pay down your mortgage and reduce interest costs over the term. Are there any disadvantages to this payment schedule? Any other options out there that I should consider?

Any input would be appreciated.

Regards


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## Eclectic12 (Oct 20, 2010)

While there is a mortgage contract in play ... what's allowed in the contract is what matters - not what's available in other mortgages.

The starting point is what are the choices available to you (i.e. are monthly, accelerated bi-weekly, accelerated weekly all available in the contract)?

When is the contract done?

If other choices are not in the contract, what does it cost to break it?


Cheers

*PS*

Or maybe a clearer way to put it is that the choices available in the mortgage contract likely have no cost. Opting for a choice that is not in the contract (unless there is a renewal on the near horizon) is likely to have costs attached to it (ex. penalties for breaking the mortgage).

Here is a link that might help.
http://www.lendingmax.ca/artman/publish/Accelerated_Biweekly_Mortgage_Payments.php


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## My Own Advisor (Sep 24, 2012)

I would recommend the following, which are all independent of each other:

1. Increase the frequency of your mortgage payments (such as to weekly or bi-weekly accelerated).

2. Increase your mortgage payments.

3. Increase the lump sum payments on your mortgage.

4. Shorten your mortgage amortization period.

5. Get a low mortgage/borrowing rate.

6. Borrow less money (principal).

Those are just things off the top of my head.


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## Chris L (Nov 16, 2011)

Covert to HELOC. Use HELOC as bank account. Deposit into bank account. "Borrow" to pay expenses. Make sure it goes in the right direction. Worked for me.


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## newfoundlander61 (Feb 6, 2011)

With my mortage gone now my approach was to have a fully open variable rate mortgage. Payments were monthly but each and every month what ever cash was left in my account at the end of the month got applied to the principal. After doing this for 10 years I was debt free. Key is to always put extra down even if its only a couple of hundred bucks, makes a big difference over time.


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## Siwash (Sep 1, 2013)

Not sure how the HELOC suggestion would help... I've heard pif them but don't know how it would allow me to pay down the mort faster...

I am getting a 1.85 variable rate mortgage right now through MCAP (Butler was the broker). I believe they do offer other payment schedule options but I have had a hard time getting through to them. I just wanted to inform myself a little better before I actually speak to a rep. My lawyer said to go with a accelerated bi-weekly as soon as possible... but never thought about the accelerated weekly until now... We are on a 30 year amort and would also like to switch that to 25 years... we put down 27% originally but it's still a big mort. Every time I call them I am on hold for over 10 min.. I've left messages but their costumer service is obviously lacking! I've even emailed with no response... 

thanks for the input... I hope to decide by the end of the week.


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## andrewf (Mar 1, 2010)

HELOC is basically an open mortgage that can be repaid at any time. However, you usually pay for that privilege with a higher rate (prime + 1% vs prime -0.7% or similar).


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## Just a Guy (Mar 27, 2012)

I wouldn't change the amortization period, rather change the payments as if you changed the amortization period. So tell the bank you want your payments to be the same as if the amortization period was 25 years. In fact, you can usually tell the bank to adjust the payments without actually changing the agreed to mortgage. 

The benefit to this is, if you run into trouble for some unexpected reason, you can revert back to the original agreement and lower your payments without any issues. If you set up your mortgage at 25 years, there is no easy way to change it to 30 years without getting a whole new mortgage, if you had it set up for 30 years, but make the payments as if it's 25 years, you can always go back to the original agreement no problem.

As someone who got into an unexpected, serious accident and couldn't work for years, I can say this is a good thing. All my mortgages have 30 year amortizations, with monthly payments usually, but are set up to make payments as if they were 20 year, biweekly rapid mortgages.

The benefits of a heloc is it's an open loan where you usually only need to make a minimum, interest only payment. There are no restrictions on how you pay off the mortgage. With some banks, you can even lock in different amounts at different rates (sort of like having multiple mortgages on the same property) so you could do half the mortgage at a variable rate, another quarter at a fixed rate with a 30 year amortization, and a quarter open for example...or any other combination and ratios that you wanted.


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## Siwash (Sep 1, 2013)

Just a Guy said:


> I wouldn't change the amortization period, rather change the payments as if you changed the amortization period. So tell the bank you want your payments to be the same as if the amortization period was 25 years. In fact, you can usually tell the bank to adjust the payments without actually changing the agreed to mortgage.
> 
> The benefit to this is, if you run into trouble for some unexpected reason, you can revert back to the original agreement and lower your payments without any issues. If you set up your mortgage at 25 years, there is no easy way to change it to 30 years without getting a whole new mortgage, if you had it set up for 30 years, but make the payments as if it's 25 years, you can always go back to the original agreement no problem.
> 
> ...


Great advice.. thanks... in fact we are planning to have a couple of more children within the next 5 years and so my wife will be off for at least 24 months (perhaps closer to 30 months) during this term of the mortgage... 

thanks


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## nobleea (Oct 11, 2013)

Accelerated weekly or bi weekly will have a marginal impact on how fast you repay the mortgage. The difference between regular monthly, bi-monthly, 4 times a month payments is not going to have a significant impact on mortgage paydown. You save something like a few dollars in interest between the various regular payment plans.

The fastest way is to make lots of lump sum payments and increase your payments every year as they allow it. Changing the payment schedule isn't going to have an appreciable affect.


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## Just a Guy (Mar 27, 2012)

The difference between monthly and biweekly rapid is an entire extra payment per year. Over the life of a 20 year amortized mortgage, that usually equates to paying it off 2.5 years faster (17.5 years instead of 20). Most of that savings is the extra payments (17.5 extras), but you would have made 30 more payments (2.5 years difference) so you do save a significant amount of interest (30-17.5=12.5 months of payments which are all saved interest).


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## CPA Candidate (Dec 15, 2013)

Accelerated biweekly reduces the length of a 25yr mortgage by 2-3 years. That's a pretty good result from a difference you hardly feel.


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## heyjude (May 16, 2009)

A bank official once told me that if I utilized all the available strategies together I could pay off my 15 year mortgage in less than 3 years. The key is to strike a balance between saving interest and maintaining cash flow for emergencies. If you increase the frequency and the amount of your payments, how far can you go without living like a pauper? What if you lose your income? What I generally do is to determine the best payment schedule that I can comfortably keep up with over the term of the mortgage, then put savings against the principal once or twice a year. That way, I am not tied to a higher payment than I can afford.


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## dougboswell (Oct 25, 2010)

Have you tried this number? It is for requests during your mortgage.

Midterm requests
1-866-633-5930
(For example: payment frequency change, due date change, privilege payments, etc.)

As many have mentioned using your annual lump sum payments and increasing your payment amount are good ways to go. If you are short of money one year you are not committed to making that extra lump sum payment. If your renewal is coming up before your wife stops working I would go for the longest term and try to have it cover the time she is off. You will know what your payments are when your wife is off and not have to worry about suddenly facing higher payments on renewal.


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## Just a Guy (Mar 27, 2012)

Most people rarely save extra money, it's easier to add an extra payment, or increase the monthly amount as people can usually make that adjustment.


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## Siwash (Sep 1, 2013)

My lender (MCAP) infomred me that if I want to change to ABW and increase the payments, I have to pay an $82 fee. If I just keep it at monthly payments (as is) and increase the monthly amount, (amount doesn't matter as long as it doesn't exceed 20% of mort), then there is no fee... I'd rather pay the fee even though I m not happy about that... Obviosly with 50 months to go before the mortgage term ends, ABW will pay it down faster (100 payments X $200 = 20,000 v 50 payments X 200 = 10,000). They try to encourage you to go with the latter scenario so that they can maximize their investment. The kicker is that pif I want to change again in the future if I choose the ABW, I have to pay that fee again. But, I don't foresee any change b/c our employment won't be changing (we are teachers), and even if the Mrs. goes back on mat leave, we can still handle $200-$300 extra per month.. I agree with Just a Guy; rarely do people have an extra $5000 kicking around... there's always something to do around the house that eats that... I think with mortgages, just like with investing, you have to contribute monthly so that you don't "see or feel" the withdrawal... 

Thanks folks... we appreciate your input.


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## Gimme the Green (Feb 4, 2014)

We originally took out a 25 year mortgage with ING direct. I wasn't as savy money wise back then but we have done OK. We were going 5 year fixed from the start and ING had some deal where you could adjust the rate down with no cost if you signed on for another 5 years. We did that a couple times as well as taking advantage of their liberal payment options. We always went bi-weekly and early on we would increase our bi weekly payments every year. Thinking back on it I could have done better but even with the simple adjustments described we will be mortgage free after 12 years. Can't wait!


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## nobleea (Oct 11, 2013)

CPA Candidate said:


> Accelerated biweekly reduces the length of a 25yr mortgage by 2-3 years. That's a pretty good result from a difference you hardly feel.


I'm not talking accelerated. I'm talking paying once a month, twice a month or four times a month.

We used the 20% increase in payments allowed every year, plus every single dollar that came available went on as a lump sum. I would make prepayments often, sometimes 10 times a month even if for only a few hundred dollars. The lowest lump sum payment was $121 and the highest was $4606.


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## My Own Advisor (Sep 24, 2012)

If the OP (Siwash) is already getting a great rate on the mortgage, and the amortization period and mortgage term is finalized, then I would focus on the following from my list (which includes for existing mortgage holders like myself):

Increase your mortgage payments and/or increase the lump sum payments on your mortgage.

I'm trying to eat my own cooking this year by doubling up mortgage payments throughout 2016. 
http://www.myownadvisor.ca/2016-financial-goals/


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## Siwash (Sep 1, 2013)

Is charging a fee to switch the schedule common practice? I thought I could do that w/o penalty... It's about $80 but it is applied any time I do change the sched. Now of I keep it to a monthly schedule and just increase the payments, then I won't pay the 80. But I figure that the accelerated bi-weekly will pay for itself...


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## My Own Advisor (Sep 24, 2012)

It depends on the fine print Siwash. Discount lenders may charge this, it's one way they recoup money from discounted rates.

Bi-weekly or weekly is still a good way to pay down large debt of any kind.


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