The Basics of Pre-payment Privileges

The prepayment privileges are included in most mortgages. They allow you to pay off your mortgage faster and reduce your interest costs. Each lender has their own prepayment privileges, some have up to 15%, 20% + 20%, double up, lump sum, etc. Let us review that 20 + 20 privilege. It allows an annual mortgage payment increase of up to 20% of the current payment plus another a yearly lump sum payment of up to 20% of the original principal.

Let us take an example of a $400,000 mortgage amortized for 25 years at 3.50%.

If you pay a $4,000 lump sum each year on your principal and you will pay off your mortgage in 20 years and save $42,452 in interest.

Alternatively you could increase your monthly payment by $400 and you will pay off your mortgage in 19 years and save $46,874 in interest. If you can do both you will save more and pay your mortgage off faster with less interest!

Usually my clients have found extra money from their tax refund, bonuses, return on their investments, or in the form of a raise. As your income increases you have the flexibility to increase your mortgage payment. Maintain your lifestyle and put the extra income towards your mortgage to reach financial freedom faster.

I provide expert advice, education and resources that homeowners need. Together we will build a plan to take advantage of not only prepayment privileges but all of the features of your mortgage that most miss out on.

Get Back by Going Green and Giving Back to the Environment

If you recently bought a property with less than 20% as down payment you paid a default insurance premium. Luckily the major insurers in Canada, Canada Mortgage and Housing Corporation (CMHC), Genworth, and Canada Guaranty have programs that pay you back for your energy efficient property.

These programs were introduced to encourage Canadians to make energy-efficient choices by making the purchase of energy-efficient home or energy-saving renovation more affordable. These programs include up to a 25% refund on your mortgage loan insurance premium.

For example, if you purchase a property for $500,000 with 5% as down payment, your mortgage loan insurance premium would be $20,187. If you qualify for the full 25% refund you would get back $5,047 back.

There is a simple way to apply for these programs. **Please see useful links below for the application process.

  • Depending on your insurer will need your mortgage insurance reference number. You can find this on your mortgage commitment from your lender.
  • You will also need either a NRCan energy evaluation file number or Energy-Efficient Building Program certificate. *For high rise buildings you will need a letter signed by the project engineer, builder / developer or Natural Resources Canada (NRCan).

Click here to apply for the CMHC Green Home program.

Click here to apply for the Genworth Energy-Efficient Housing program.

Click here to apply for the Canada Guaranty Energy-Efficient Advantage Program.

You must claim the refund within 24 months of the purchase of your property or home improvement. Both programs have more specific details for the different types of energy efficient properties and renovations. Your documentation can not be older than 5 years. Please see the links below for more information.

CMHC – Green Home program

Genworth – Energy-Efficient Housing program

Canada Guaranty – Energy-Efficient Advantage Program

 

A List of Success Stories

Find Energy Efficient Leed certified buildings in your area

**

Find a energy advisor to evaluate your home using the EnerGuide Rating Service so you can participate. (1-800-387-2000)

A sample report of energy efficiency evaluation report