Are you ready to save some serious cash? Here are some tips on how can pay off your mortgage faster:
Stay in Tune
Most people forget about their mortgage once they obtain it and start making payments. It goes on “auto pilot” until renewal time. You must try to stay informed and keep up-to-date on interest rates and mortgage options. New opportunities could potentially lead to large savings. You just need to understand your options.
For example, if interest rates have dropped since you obtained your mortgage, you should investigate the penalties for breaking your mortgage, and reapplying for a lower interest rate. If the costs savings are significantly greater than the penalty, you should act on this and look at refinancing options available.
Accelerated bi-weekly payments
If your cash flow permits, you should look at accelerated bi-weekly payments. This will represent ½ of what you are paying for your monthly payment. However, instead of paying your mortgage on a monthly basis 12 times per year, you will pay your mortgage every two weeks for a total of 26 payments each year.
This simple method can save you thousands in interest costs and pay off your mortgage much faster.
Round up your mortgage payments
This is a simple but very effective method of paying off your mortgage faster. Obviously, the higher your payments (provided the extra goes to principal), the faster you will pay off your mortgage. If cash flow permits, simply round up your payments. For example, if your accelerated bi-weekly mortgage payments are $575, round up to $600. Provided this is allowed and within the guidelines of your existing mortgage, the extra $25 will go directly towards principal and over time will represent a significant difference to your mortgage balance, in your favor.
If you receive a raise, unexpected money, bonus at work, tax refund, etc., consider applying some of this towards your mortgage. It will go a long way.
Lump sum payments
Most lenders have built in prepayment privileges in the mortgage. This allows you to make extra lump sum payments throughout the year. Any lump sum payment is applied directly to the principal. Taking advantage of this option, even for a low amount, is an excellent way to pay your mortgage off faster.
Use Discretion
Paying off your mortgage early makes sense and will save you thousands of dollars in interest over the lifetime of the mortgage. So will a shorter amortization period. However, for some, it is not always practical or the best option. For instance, if you have other debt at higher rates, it makes sense to pay off the debt, not the mortgage. If you don’t have any savings or have not yet invested into your retirement plan, it may be more prudent to work on those items first.
Every day, we help Ontarians save money through refinancing. Contact us today and let’s get started.
