Tips to save on interest and repay your loan quickly
Shorten your amortization period
You can save a great deal by shortening your amortization period. By choosing an amortization period of 20 rather than 25 years for a $100,000 mortgage at 7.5%, the capital balance, after 5 years, would be $86,755 rather than $91,604.
Increase your payments
Increase your regular payments up to double the initial payment, once a year (or once a term if the term is less than a year).
If possible, repay up to 15% of the initial amount borrowed every year (or once a term if the term is less than a year).
Accelerate your payments
This is the most popular method. For example, with weekly payments, the borrower makes the equivalent of 13 mortgage payments per year, i.e. four weekly payments more than a borrower on the regular plan. Accordingly, with weekly payments, a $100,000 mortgage at 7.5% amortized over 25 years would be paid off in 15-20 years, while the same mortgage would take 19-20 years to pay off with bi-weekly payments.Choose to make weekly payments and pay an extra amount every week. In the long run, you'll enjoy significant savings and reduce your amortization period.
Payment schedule |
Repayment amount |
Amortization in years |
Interest cost |
|---|---|---|---|
Monthly |
$712.19 |
20 |
$70,925.69 |
Weekly |
$163.48 |
20 |
$70,603.06 |
Accelerated weekly (monthly divided by 4) |
$178.00 |
17.2 |
$59,149.88 |
 |
|||
By choosing weekly accelerated payments instead of monthly payments, you reduce your amortization period by 2.8 years and save $11,775.811.
