Many people think that they must pay off their Ottawa mortgage as soon as possible, and don’t consider exactly what that means. And while it might be obvious why you should pay off your mortgage early, it might not be as obvious why you shouldn’t.
Of course, the reason why you pay off your mortgage early is so that you can get that huge debt burden off your shoulders earlier, and start using that money for something else – such as retirement! But if you’re not careful, you could actually end up paying more, and having fewer savings, than if you had just paid it off in due time.
Firstly, if you have a closed mortgage paying it off early might not be a good idea. With closed mortgages you can usually only prepay a certain amount; and while this will vary among lenders, it’s usually about 10 per cent. If you pay more than that 10 per cent, you’ll likely be charged prepayment penalties, and these can be hefty too – usually worth about 3 month’s worth of interest charges the lender would have received if you had paid off your mortgage according to schedule. However, if you have a closed mortgage and you only have 10 per cent or less remaining on the balance, it still could be a worthwhile move to pay off your mortgage early.
Paying your mortgage off early could also be helpful to you if you’re not planning on buying another home again. This is because if you’re simply moving from one home to another, you might be able to port your mortgage – a great option if you were able to buy your home at today’s super low interest rates. Another option you have if you’re not buying a home again is that you could have the buyer assume your mortgage, something else that has gained more popularity ever since interest rates dropped to rock bottom.
Paying your mortgage off early is a big decision, almost as big as the one you made when you decided to take on the mortgage in the first place. But, paying your mortgage early isn’t always the best choice, and could cost you a lot in the long run. If you’re considering paying off your mortgage early, speak to an Ottawa mortgage broker that could help. They can review your entire situation, and help you understand your current mortgage better. Best of all, they’ll be able to tell you if paying your mortgage off early is worth it, or not.
