It is every home owner’s collective dream, to pay off their mortgage as quickly as possible and be debt free while they’re still young enough to enjoy it. But how can you speed this process up? Things are always changing around you and a 25 year amortization isn’t often the case. Job’s change, people sell and move houses, families grow, kids go to school, renovation take place and basically anything else you can think of. However, there are things that are in your control that you can do to make the most of what you have and essentially; pay off your mortgage faster. Here are 7 tips to help you out.
Set your payments to Bi-Weekly rather than monthly. By doing this, you are adding an additional payment to your mortgage every year. This alone will help shave a year or so off your amortization.
Make lump sum payments – Lump sum payments are probably the most effective way to knock some time off the life of your mortgage. The beauty of making a lump sum payment is that it goes solely towards the principal of your mortgage, not to interest. Check in with your mortgage broker or lender to see what your pre-payment privileges are. Some lenders will allow 15% of your principal balance to be paid down without penalty; some will allow more and some less. Make sure you know this when signing up for your next mortgage if you anticipate having some extra cash sitting around.
Don’t abuse the equity in your home. Often time’s people will re-finance just because they can and take equity out to buy things they do not need. Granted, things come up and need to be dealt with. But you have worked hard to build that equity up, don’t waste it needlessly. If you do re-finance then make sure you are getting the best deal available that is in line with your future goals.
Downsize if possible. You may be living in way more house than you would ever need, have you ever considered downsizing? A lot of people will keep extra space they don’t need for reasons that just aren’t logical. Or maybe your kids have just moved out for good and 5 bedrooms are a little excessive. If you are able to downsize and lighten the load of your mortgage, this will obviously be a big help.
Take advantage of low rates. Always stay informed and keep an eye on mortgage rates. As they raise and drop, a lower rate than what you are currently paying will save you money on interest. If it works out where the penalty to break your mortgage is outweighed by money saved then you should consider a re-finance. If you do this and also keep your payments the same as they were with the higher rate, that money will go directly towards principal and you will shave another while off your amortization. You can currently get rates as low as 2.00% Ask us to review your mortgage today!
Round up your payments. Let’s say for example your monthly payment is $1,445.93, if you round this up to an even $1,500 then that extra money will go directly towards your principal not your interest. Most lenders offer payment increase privileges, check in with your lender or broker to find out what yours are and see how much extra you can pay without penalty. Check out our calculator, it will show you an updated amortization scheduled base on extra payments each month.
Stay informed and in the know – Knowledge is your best friend in any investment. By staying up to date with mortgage trends, news and forecasts you put yourself in the best position to succeed. Often times there will be a rate drop or product special that can help you save money. Or there may be certain perks in your mortgage commitment that help you pay down your mortgage quicker. Talk to your broker if you need clarification or advice on any of this. Sign up for our e-mail updates here to receive “The Forum Weekly” to your inbox.
There are many little things you can do to pay off your mortgage faster and free up some cash every month, the above are what we feel to be the most common and effective. If you have some other ideas or would like to discuss these ones then we encourage you to join the conversation in the comments below or contact us directly.
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