July 2010 Mortgage Reduction Report
I have not updated our Mortgage Reduction Report in the last two months as we have gone through some changes with our finances. The first being moving our mortgage to National Bank and utilizing the All In One Account for our mortgage and a majority of our banking. The second was the sale of my condo. The tenants wanted to move out and I wanted the equity out of it to pay down our mortgage and no longer wanted the hassles of being a landlord.. The sale went smoothly and the funds have been applied against our mortgage. The sale of the condo, closing bank accounts and not keeping as much money in another account has allowed us to drastically pay down our mortgage
With these changes and the All in One Account I will be changing the way we track our progress. I am just going to worry about our total debt and I will start to track our net worth as well. Our goal is to have our balance decrease $5,000 a month. There will be fluctuations due to the banking changes but we are hoping to stay on track. The current balance is $181,276.30 which means we have paid off 43% of our mortgage in 2 years. We are definitely on track. We have also talked about selling our other condo when the tenants leave. That should virtually guarantee the goal is achieved and we will be debt free by July 2013.
We have saved a projected interest amount of $286,596.74. Our current net worth is TBA.
New Mortgage Complete
We received the papers from the lawyer today for our mortgage refinance and worked with the numbers. I am pleased to say that the transaction cost us nothing. Actually, we saved about $933 over the remainder of our term including the penalty and legal fees. How is this possible you ask? Well the first factor was we locked a rate in after the first jump in fixed rates. By the time the deal closed fixed rates had jumped a bit more reducing our penalty. We would have done better if we would have locked in before the first increase but I am happy with the result. The second factor was that we were able to get our penalty reduced by $1168.48. This took a couple of phone calls and some explaining to our lawyer, but it in the end it was reduced. Check out the Original Discharge Statement and the Revised Discharge Statement. I removed the personal and lender information from the statements. I am curious to know what the asterisk represents internally to the lender. If you want to know how we saved this money, purchase my soon to be available ebook, The Mortgage Reduction Guide.
Saving money by changing lenders was a perk, but not the reason we chose to move our mortgage to National Bank. National Bank has an All in One Product that we felt would better suit our needs and save us some interest costs. I rarely recommend products on my blog, but this one impressed us so much that I believe it is worth mentioning.
In the next couple of weeks I will show you how we intend on saving money using this product and how you may be able to as well. Due to the structure of the account I am also going to have to change the way I track our Mortgage Pay Off Progress. I am bouncing a couple of things around, but I have not decided exactly how I will track this. I may add a line for Net Worth to the mix. I have updated it to reflect the new mortgage amount and interest paid. To properly reflect the cost of the switch I have included the penalty and the legal fees into the interest costs. These number will change quite a bit by June or July when we consolidate some accounts and no longer have money idly sitting around.
Original Balance: $316,000.00 (Jul 2008)
Current Balance: $238,836.86 (May 2010)
Total Payments: $108,907.77
Total Interest: $31,137.38
Projected Interest Saved: $270K +
April 2010 Mortgage Reduction Report
Although we are in the middle of April I am able to post the results for the whole month because we are not making any prepayments. There are a couple of reasons for this. I have a large tax bill because I do not pay any taxes during the year on my business income. I have increased my at source deductions with my full time employer so I will not have that issue next year.
There are some changed coming in the next couple of months with the way we handle and track our debt and net worth. We are moving our mortgage to National Bank to take advantage of their All in One product. Although we are still focused on paying down our mortgage I also want to tie that in to our net worth. We are still planning for the future and there may be an opportunity to take advantage of the RRSP rules in the future. We are also going to cash dam our rental properties. There will be more on that in the future, but basically it will turn no tax deductible debt into tax deductible debt which is advantageous.
I have learned some things and saved some money in the process of refinancing our mortgage. I will pass these tips on to you in the next few weeks. Our new way of banking should speed up our debt reduction plans.
March 2010 Mortgage Reduction Report
We have just made our mortgage prepayment for March. In February we were short $1,934 for our prepayment. This month we were able to prepay $7,000 with catches us up and give us a few hundred dollars towards April’s prepayment which will be needed. We have reached a couple of milestones with this month’s prepayment.
We passed the $100,000 mark for mortgage payments this month. We have been making payments for 20 months making our average monthly payment $5331.34. The other accomplishment was having paid off 25% of our mortgage. We have actually paid off 26% this month. I am quite happy with both accomplishments and hope we are fortunate enough to be able to keep it up.
I will have have a hefty tax bill on April 30th and we may be taking a tropical vacation as well. We will have no issues paying for these but our mortgage prepayment may not be the full $4,712 for the month. I am hoping I can pick up some business or some overtime at work to help with the shortfall.
Our projected interest savings are now $270,774.30
February 2010 Mortgage Reduction Report
February is almost over and I thought we were not going to be able to hit our target for our mortgage prepayment this month. That was until the bank made a big error. I sent in a prepayment request for $500 and somehow $12,500 was taken from our account for a prepayment. This caused a little grief as we were in overdraft for a day before using our line of credit to get us out of overdraft.
I am going to call the bank and ensure that all the money was put against our mortgage and see if they can figure out how that happened. Although everyone makes mistakes I do not see how I would put $12,500 instead of $500 and I can’t see how the bank would either. After we get stuff figured out we are likely just going to leave things as is. The difference in the interest rates between the line of credit and our mortgage is minimul so the difference in the interest over the 3 months it will take to get the line of credit paid off is about $5 as compared to the mortgage. If the bank finds that they made an error and we find out that we have suffered any loss by going into overdraft I am confident that they will compensate us.
There is a big change in our interest saved this month. I was playing with our mortgage numbers the other day and noticed that I had made an error when we first took our mortgage. Before the first payment was even made we switched to accelerated bi-weekly payments rather than monthly. I neglected to calculate the interest savings that we experienced when we switched to the accellerated bi-weekly payments. Putting this into the equation I am extremely happy to say that we have saved $276K in interest costs combining the bi-weekly payments and our monthly extra mortgage payments. This month’s bank error certainly helped. That number simply astounds me. We had an immediate savings of $97,552.90 when we switched to accelerated bi-weekly payments and it reduced our amortization period to 32 years. Our additional prepayments have done the rest.
If you have not looked at what a couple of hundred extra dollars a month will save you over the life of your mortgage, you really should.
We did pass a couple of milestones due to the bank error. Since we started our mortgage 19 months ago we have paid a total of $108,606.22. We have also paid our original mortgage balance down by 27%. Now we will be paying down the line of credit for three months.
After we got our error sorted out we decided no to utilize our line of credit to bring our mortgage balance down. Our prepayments this month totaled $2000. That combined with the additional $778 last month were are $1934 behind in our prepayment YTD. We will see what we can do about that in the months to come. The milestones we had reach have been reversed and we will have to wait a couple of months before reaching them.