![]() This results in you paying for the equivalent of 13 months of monthly mortgage payments every year. In other words, you’ll be paying every two weeks, at an amount that is slightly higher than what a normal bi-weekly payment would be. With an accelerated mortgage payment, you make a payment more frequently than the traditional monthly payment, but your payment is still based on the regular monthly amount.įor example, the payment amount for accelerated bi-weekly would be what the monthly payment amount would be, divided by 2, and paid 26 times each year. In Canada, the two main accelerated mortgage payment frequencies are accelerated bi-weekly and accelerated weekly. This means that increasing it will permanently affect your future payments, and it might not be possible to decrease it in the future. Some lenders might only allow you to increase your regular mortgage payment amount. Instead, it will still be $1,500, unless you decide to make another extra payment. For example, if you double up your RBC mortgage payment from $1,500 to $3,000, you’re not required to make a $3,000 mortgage payment the next month. In most cases, the “increase your mortgage” feature does not affect your original mortgage payment amount. Going over this limit will cause mortgage penalties to apply. You can, however, make a one-time prepayment by using your annual 10% prepayment allowance. You can’t make an extra mortgage payment of over $1,500 in a given month, even if you didn’t make an extra payment the previous month. In other words, if your monthly mortgage payment is $1,500 with RBC, then you can make an extra payment of between $100 to $1,500 every month. You can also "Double Up" your regular mortgage payment, which allows you to prepay between $100 up to your regular mortgage payment amount, with this amount going directly against your mortgage's principal balance. For example, RBC allows you to make extra payments, as a mortgage prepayment, equal to 10% of your original mortgage principal amount every year. The other thing you need to make clear to your lender is that you want your overpayments to have the effect of reducing your mortgage term rather than reducing your monthly payment.Not all lenders allow you to make extra mortgage payments, and they may also limit the amount of extra payments that you can make each year. At Santander the limit applies to a calendar year, so it is reset on 1 January. At HSBC, the year’s limit is reset annually, either on the date your mortgage account was opened or the date you switched to a fixed rate. So the amount you can overpay remains the same for the whole of the mortgage term.Īt HSBC, Santander and Yorkshire building society, however, the 10% limit is applied to the outstanding balance each year, so the amount you can overpay goes down. ![]() ![]() At Nationwide building society, for example, the limit is 10% a year of the original loan amount (for all mortgage products reserved on or after, except for standard mortgage rate and base rate mortgages where no limits apply). You also need to look closely at the detail to avoid going over your lender’s limit. With fixed-rate mortgages this is typically 10% of the mortgage loan, although a handful of lenders let you overpay up to 20%. This is the amount you can overpay each year without incurring any early repayment charges. So before you set up overpayments on your mortgage, you need to ask your lender what your annual overpayment allowance is.
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