As you make payments on your mortgage, week after week or month after month, it is crucial to understand the importance of an annual review of your progress. You might ask why it is important to do this if you are following the payment schedule, and not missing payments, isn’t that enough? Technically, yes, it is enough. But doing just enough isn’t going to save you money or get you mortgage free faster.
When you buy a car, do you just drive it around without periodically checking the gas gauge or taking note of the way it operates? No, you check to see how much gas is in the car to make sure you don’t run out. You also take note of certain strange noises and behaviours too, and if you hear something not quite right, you have the vehicle checked out so you don’t have a breakdown. Mortgages work the same way. Periodically, you should take a look at how your mortgage is working for you, and make sure there isn’t something that you should tweak to make it work better. Periodically checking in on your mortgage options and exercising lump sum prepayment privileges when funds permit, or setting up a slight increase in the amount of your payments as your cash flow allows, could save you thousands of dollars in interest during your mortgage. Use your Amortization Schedule to track how each payment is divided between principal and interest. You can also use it to track how your prepayments are helping you pay your mortgage down faster.
For many Canadians, dealing with financial matters is a chore. But the current low-interest-rate environment makes it a good time for home owners to become proactive about their overall financial health by doing an annual check up on one of their most important obligations – their mortgage. A mortgage shouldn’t be something you sign once every few years and then forget about. Life can change substantially in a year, and a regular review can help ensure that your mortgage is still the right fit for your financial situation.
A number of major life changes can mean a mortgage check up makes sense, such as starting or growing a family, starting a business, loss of income or illness, home renovations, purchasing an investment property, or other major expenditures. Sitting down with a Mortgage Professional like myself and taking a look at your current mortgage situation is a good way to determine if you should make a change to your mortgage in order to improve your financial position.
As life changes, take some time to review your financial position to make sure you are keeping financially fit. You could save money, benefit from an improved equity position, and get mortgage free faster!