23 Feb How to Pay Your Mortgage Off Quickly
Do you dream of being mortgage-free? Imagine what you could do with that money, each and every month! Here are my favorite tips to help you pay your mortgage off quickly.
Choose a Flexible Mortgage
Not all mortgages are created equally. Some include options which allow you to make extra payments, which help you pay your mortgage faster than scheduled. Before signing for your mortgage, make sure it’s flexible. Otherwise, you’ll have to wait until the end of your term to make additional payments.
Go Bi-Weekly Instead of Monthly
One effective way to get ahead on your mortgage is to switch to bi-weekly payments. When you pay monthly, you make 12 payments per year. If you choose bi-weekly instead, you will make 26 payments or one payment every 2 weeks. If you do the math, you’ll see that’s like making 13 monthly payments instead of 12. The extra money goes directly to your mortgage principal, which can shave a few years off your mortgage amortization!
This option is especially painless if you get paid every two weeks since your mortgage payments can be scheduled to match your payday.
Got Extra Money? Make a Lump Sum Payment!
Many mortgages allow you to make extra payments towards your mortgage. These extra payments are applied directly to your mortgage principal. Even small sums can add up to thousands of dollars saved in interest, and can let you become mortgage-free years faster!
To see the effect of making a lump sum payment, try out the Financial Post Mortgage Calculator. Simply type in your current numbers, and try entering different scenarios to find out how much money you could save.
Increase Your Monthly Payments
Did you get a raise recently? Why not put some of your new-found money towards your mortgage? If your mortgage allows it, you can increase your regular payments. Even a few extra dollars per payment can make a difference – you’ll be surprised how quickly the money adds up.
Don’t Bite Off More Than You Can Chew
If you want to pay off your mortgage quickly, make it as small as possible. Make a larger down payment. Choose a less expensive neighbourhood. Choose a townhouse instead of a detached home. Choose a smaller house, even if you think you can afford a bigger one.
If you’ve already bought your home, this advice may seem like it comes a little too late. But loans can come in many forms, including for a major renovation, for upsizing your home, for a new car, and more. The more overall debt you have, the harder it will be to pay off your mortgage quickly.
For more information on not getting in over your head, check out my article: How Much Mortgage Debt is Too Much.
Get the Best Interest Rate
Negotiating the best possible interest rate will help lower your mortgage costs. Getting a lower rate saves you money each and every month, freeing up cash. This cash can save you even more money if you apply it towards your mortgage principal. A double-win!