There were a few on refinancing a mortgage -- not surprising given how low rates are right now -- and I read all of them and most of the comments to see what every one else is doing.
Here's what surprised me: not one of the posts or comments I read even mentioned open mortgages, variable rates, or double-up payments. Granted, these were American blogs, but surely they have those in the US? I have all 3, and I think they're brilliant.
- An open mortgage means that you can make additional payments of any amount, at any time. These additional payments go straight to your principal, which reduces your amortization period faster. The interest rate is the same for an open than for a closed mortgage. I put my Xmas bonus and my tax refund towards my mortgage.
- Variable rates: As the prime rate goes down, so does my mortgage rate. This is a great time to have a variable-rate mortgage. My rate is down to 2.75%. Variable rates have been a great deal for at least a decade now, and I think we can safely assume rates will stay low for awhile yet. And if they go up, you can lock in at anytime without penalty.
- Double-up payments: Banks here allow you to double-up each mortgage payment. (It doesn't have to be double, any amount over $100 will do.) Nice feature if you have the money to do it. Every year I did the math, and as soon as I could, I changed my amortization to 35 years which lowered my payments enough that I could now double them. I'm paying the same amount I was paying before, but now, 1/2 my payment is going straight to my principal. So, my "real" amortization is going to less than 1/2 those 35 years, since I'm paying down the principal so much faster. And yes, I got my banker to do the math on his fancy tools and I will be saving on interest costs and paying off my mortgage faster even if I'm starting off with a longer amortization.
It all adds up. I will be mortgage-free in 2 years, and I can't wait!
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