Tips to Pay Off Your Mortgage Faster
Mortgage Tips from your Trusted Mortgage Knowledge Professional
Paying down your mortgage faster is one of those suggestions that financial advisors love to make to their clients. And while many Canadian’s dream about the financial freedom of being completely debt-free, most are unaware of the simple strategies they can utilize to shed years off their mortgage.
In this blog post, I will highlight four strategies you can implement into your life to help pay down your mortgage faster.
Tip 1: Accelerated Bi-Weekly Payments
Are you currently making monthly payments 12 times per year? Instead, try speeding up the process with an accelerated bi-weekly payment plan. With this plan, you end up paying 26 bi-weekly payments per year. So in effect, you are paying the equivalent of 13 payments per year. Prior to setting up accelerated bi-weekly payments, confirm that there are no pre-payment penalties.
Tip 2: Round Up Mortgage Payments
A pain-free way to help your debt disappear faster is to round up your payments. For example, if your accelerated bi-weekly payments are $848, consider rounding the payment up to $900. The additional $52 will make a significant difference over time, and chances are, you will barely notice a difference in your monthly budget.
Tip 3: Make a Lump Sum Anniversary Payment
Most closed mortgages will allow borrowers to make an extra payment each year. This additional payment can be 10%, 15% or 20% of the original principal in each calendar year, without penalty.
Tip 4: Stay Informed
So you’ve purchased a house, have a mortgage and have begun making monthly payments. At this stage, it can be easy to fall into a routine as the payments come out of your accounts automatically. Don’t fall into this routine. As a homeowner, you need to stay up-to-date with interest rate changes and the new options available to you.
While paying off your debt early will result in less interest paid over the lifetime of your loan, it is not always the best option for every homeowner. If you fall into one of these three categories, then the interest you would save on your mortgage would not be as beneficial to you as addressing your other financial issues first.
- High interest debt on credit cards
- No emergency fund savings
- No savings for retirement
It is very easy to virtually play around with the various payment scenarios available to you. Most financial institutions, banks, and brokers have online mortgage calculators. If you are using an online calculator, make sure it is from a Canadian source. American mortgage calculators are calculated differently and will provide you with inaccurate information.
Armed with this information, I hope these tips will help you pay off your debt sooner. If you have any questions, feel free to contact your local Port Coquitlam Trusted Mortgage Knowledge Professional, Milka Lukacevic of The TMK Team.