HOW TO SLASH YOUR MORTGAGE

By Mike Lightbourn

Did you know you can save a substantial amount of money by making accelerated weekly payments on your mortgage as opposed to monthly payments?

Letís say you take out a $360,000 mortgage at a fixed rate of 8 percent for a term of 25 years.

Now, instead of paying by the month, you make accelerated weekly payments.

Youíd realise approximately $115,000 in amortisation interest savings, according to online resources provided by one Bahamas-based bank. (This is an example. It is not to be confused with paying off the principal loan).

Moreover, if you paid on time and never missed a payment, the mortgage would be paid off in less than 20 years versus 25 years. Thatís a heck of a savings!

Under an accelerated weekly payment plan, you pay a little more a week. If you are fortunate enough to be able to do so, this is definitely worth pursuing.

Your true cost of borrowing Ė what it costs you to borrow the money at the end of the day - will depend on how much you borrow, how long you borrow for and your interest rate.

A combination of factors comes into play that affects the cost of borrowing money.

For instance, a low interest rate over a long term can actually end up costing more than a higher interest rate over a short term.

To reduce your cost of borrowing on existing debts, pay down higher interest rate debts first and increase your payments so your debt is paid off more quickly.

Use an online bank calculator to get a feel for the various options and make sure you work with a loans officer to come up with a local bank-approved formula that works best for you.

THE DOWNPAYMENT

Years ago, if you wanted a home, you saved until you had a 20 percent down payment.

Many people are now buying homes on much smaller down payments because they need a home of their own and simply canít afford to pay more down.

This means the cost of the loan will be much more because of the interest aspect.

Itís a double edged sword. Make sure you look into the various lending options before you make a decision.

HELPING YOUR CHILD

One of the biggest gifts a parent can give their child is a down payment on a mortgage.

Of course, thatís easier said than done.

What parents can do to help their children is open a savings account at their childís birth. Any cash gifts they receive from birth to house hunting age can be put into the account.

When the child gets older, explain the process and put a portion of any allowance or odd job money he may earn into the account. Give him a bank book so he can watch his money grow.

A savings of $20 a week will translate into more than $20,000 in 20 years, plus whatever interest is paid on the loan.

Thatís a very healthy start towards a down payment.

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(Mike Lightbourn is president of Coldwell Banker Lightbourn Realty).