Save TONS in Mortgage Interest!

September 27, 2011|By David Lester

How to save TONS in Mortgage Interest!

When I was a banker we had this tool to show you how much you’d pay in interest over the amortization.  When you look at the bottom of the chart I always liked to point out that you basically pay the same amount in interest as you took out on a mortgage at an average mortgage rate.  Cripes!  If your house doubles in 25 years you’d still be flat.  Here is how to take some of the “ouchie” out of that number.


1. Set your payments from monthly to bi-weekly–or even better weekly. Bi-weekly payments mean you make one extra monthly payment per year compared to monthly. Over the amortization time of your mortgage these extra payments will save you thousands.

2. Round up your payments. If your bi-weekly payments are $829.68, for example, round them up to $900. The extra $70.32 bi-weekly will save you even more over the amortization of your mortgage.  Plus round numbers are nice to see when you’re adding up your expenses at the end of the year.

It is so hard to step away from your prime minus variable rates when they are so low. I had a rate of prime -.85 before I sold my place. Stick to your variable rate.  In my opinion interest rates will climb slowly over the next ten years.   Increase your payments so that you are making the payments that you would be for a five year fixed. There are two advantages to this:

  1. You will be paying down your principal very quickly, which will equal less principal to pay back when rates go back up. It will save you bundles in the long run.
  2. You’ll also be used to the payments at a higher interest rate. When you need to renew or decide to go with a fixed rate, you’ll have a few years of already making payments at that higher rate.

Get rid of the extra insurance and crap the banks offer you.  Make sure you are covered through work or get proper term and disability and then dump that extra money on your mortgage.  I use to get huge bonuses on my disability and life insurance sold on mortgages.  If the banks make tons of money off it – it’s not a good deal for you.

Dump your RRSP contributions back onto your mortgage if you don’t have debt or RESPs to fund.  It’ll help you finish off the mortgage faster.  If you get any unexpected money from insurance or estates – dump it on there too and feel good about where it went.

Try out some of the mortgage calculators online to see how much interest you save with the different options, along with how many years you’ll “bump off” your amortization, instead of it bumping you off. And mortgage free years are years that you can spend that mortgage money on your extra special life!

Have a mort-free week,



David Lester
About David Lester

David Lester is a best selling author and professional Financial Coach, helping people be better with their money. David has written a personal finance book that breaks with traditional attitudes towards finance and describes his own philosophy to money that he has gained through his personal and professional experiences. His philosophy on money applies to many areas of everyday life, including banking, investing, goal setting, shopping and entertainment.