Purchasing a home in itself can be stressful enough. Being bombarded with unfamiliar jargon can add to that stress. Fortunately for you, we've created a helpful cheat sheet that will make you a mortgage expert in no time!
Prepayment Privileges
Your mortgage has an option to make extra payments up to a certain percentage of the whole without incurring any penalties. There are 3 ways you can make extra payments towards your mortgage:
[1] Additional Payments: This option is simply where you can opt into making additional payments towards your mortgage with one lumpsum payment or several lump sum payments.
[2] Increased Payments: This option allows you to increase the payment amount arranged annually. This can often be done in conjunction with the additional payments.
[3] Lump Sum Payments: Most lending institutions allow you to make large lump sum payments towards your principal. In doing so, you will rapidly decrease your balance owing.
Advantages of Prepayment Privileges
- You'll be able to pay off your mortgage faster
Disadvantages of Prepayment Privileges
- No real disadvantage considering these are just options that are available for mortgage repayments.
- If you don't foresee any extra money in your budget, you may not want to consider the options available for prepayment privileges.
Every lending institution has different policies on their prepayment privileges terms so consult your lender to determine what mortgage plan is right for you.
By the end of this 4-part series, you'll be well informed on the various elements involved in mortgage plans and you'll be able to decide on what plan is best suited for your needs.
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