A great way to save on interest costs and reduce the life of your mortgage is by making annual principal payments.
If you choose a closed mortgage, every lender has their own allowable prepayment amount. They range between 10% to 20% of the original principal amount of your mortgage once in every 12-month period. The prepayment is applied directly to the principal of your mortgage.
Some lenders also offer Double Up your regular mortgage payments (of principal and interest)or you can increase the actual payment by a certain percentage annually. Which is not part of your lump-sum allowable amount.
You can make principal payments starting from $100.00 minimum or some lenders offer to start at $500.00 anytime throughout the year
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At time of maturity, you can make principal prepayments of any amount you wish on your mortgage principal at renewal time
A principal prepayment of $2,000 a year can make a substantial difference in the time it takes to pay off your mortgage.
To find out how much you are specifically allowed you will have to either dig up your commitment or approval letter or look it up on your lender’s website!
