This is a guest post from Kelvin Mangaroo, President of RateSupermarket.ca. Kelvin had the winning bid in the Bloggers for Charity contest, earning the opportunity to become a guest blogger on Boomer & Echo today.
It’s a brand new year and of course what’s on the top of your mind? Saving money. This year you will certainly bring more bagged lunches, get less take-out, and cut coffee out of your daily spending. Anything to save a dollar – right?
Yes those things matter. But what you might not have considered is how much you could be saving by making bigger changes in the way you look at your money.
So…how much savings am I talking here? Well let’s use your mortgage as an example. By following these three steps you could be saving $65,541 on average based on a $300,000 mortgage value amortized over 25 years. (And no – that number is not a typo.)
Compare, Compare, Compare
Those that compare – save. It’s as simple as that. Users on RateSupermarket.ca that have compared mortgage rates save 72 basis points on average. So what does that mean for an average mortgage of $300,000? Over the course of a 25 year mortgage the result is $34,907 in savings ($1,396 saved in your first year).
Comparing isn’t just for mortgages – consumers that compare groceries save $1,150 a year on average, those that compare Internet providers save $612 on average, and those that compare cell phone plans save $492 on average.
Add that all up? You could be saving $3,650 a year just by shopping around to find a better deal.
Switch to Rapid Payments
When it comes to your mortgage payments, the type of payment you choose can result in massive savings. What’s the best choice? Rapid payments can not only save you $19,887 over the course of your mortgage on average, but it will also cut 2 years off your home loan.
So…how do rapid bi-weekly payments save you money? Since you pay half of your monthly payment every other week, the result is you end up making an extra payment each year in a way that you probably won’t notice. Which brings me to my last point…
Make A Lump Sum Payment
So now that you’ve cut out your daily latte, the question is – what’s the wise thing to do with that extra money? Three words: lump sum payment.
Annual lump sum payments of a mere $1,000 over 20 years will save you $10,747 on average. Now $1,000 might sound like a lot, so think of it as saving $83.50 each month, or passing on 17 lattes. Now that doesn’t sound so bad, now does it?
If you’re looking to save money this year, looking at your variable spending is a great place to start, but considering a change in bigger items can have a much bigger impact on your financial health in the long run.
If you’re interested in these stats, we’ve put together an infographic that goes through them in more detail: Save Money on Your Mortgage.
Boomer and Echo, thx for participating in Bloggers for Charity and to Kelvin for making a donation.
Interesting post. Speaking from experience, I can definitely attest to how much you can save by putting lump sums down on your mortgage. It feels nice to pay it off so much quicker!
Good post!
I’m paying my mortgage on a bi-weekly basis and, when possible, I do make lump sum payments.
When I get the annual mortgage statement letter, it’s nice to see that this debt is being paid off at a good pace.
Everyone needs to shop around more, especially on big stuff like this. Big companies normally have policy that you need to get at least 3 quotes with any big purchase, we should all be doing this in our personal lives. Never just go with a friend of a friend.
Agreed! What’s scary though is that Canadians only get 1.96 mortgage quotes on average before they choose a lender (although it is the biggest money decision you’ll make).
Compare that to the number of places people compare something as simple as the price of milk. There are HUGE savings for those that compare, especially when it comes to bigger items like your mortgage.
I could be wrong, but I think the reason people “compare something as simple as the price of milk” is because these sorts of purchases are done regulary and so are always on an individual’s mind.
However, that being said, I agree with you. People should shop around a lot more than they currently do when it comes to mortgages.
Absolutely! People should compare all purchases – all we’re saying is that people should apply comparison shopping to not only everyday purchases but for personal finance products as well.
Good post. We have our mortgage on a bi=weekly rapid plan so we are always working to pay it off faster. We also shop around for deals when we need things. Watching the flyers online is great.
Bi-weekly payments are an amazing way to reduce the burden, one of the best IMO. There are mountains of ways to save money, one tip is to turn it into a challenge, compete with friends and family and see who can save the most. This gives you a kind of support group that can be really motivating.