Is paying your mortgage off faster at the top of your to-do list? You’re not alone. Mortgage payments can feel like a never-ending burden, which most homeowners can’t wait to get rid of. Luckily, there are a few things you can do to help pay off your mortgage faster. Not only will these tips relieve some of the mortgage burden, but it will also save you money on interest payments, allowing you to build more equity in your home.
Here are my top four tips for helping you to pay off your mortgage faster:
Tip #1: Consider changing the length of your loan
Are you locked into a five, 10, or 15 –year mortgage? Depending on the current length of your mortgage and your financial position, switching to a shorter-term loan can be a great way to pay off your mortgage faster. This will help save you money on interest payments as rates are typically lower for shorter-term loans. Additionally, given the shorter time frame, the actual number of times you will have to pay interest will decrease, which will save you even more! Before making the switch to a shorter loan term, however, make sure you will be able to manage the additional financial obligations. Although your interest payments will decrease, the amount you will be required to pay monthly may grow. It is important to ensure any decision you make is still reasonable for your current position. You should also ensure that it aligns with all your other financial goals.
Tip #2: Look into the details of your prepayment privileges
What are the details of your mortgage contract? Depending upon your contract you may be able to increase the amount of your regular payments or make a lump-sum payment to help pay off your mortgage quicker. Each option allows you to tackle more of your mortgage obligation annually, but it is important to consider what strategy is best for you and your financial position. Would you rather pay slightly more each month or make one additional lump-sum payment annually? No matter what option you choose, there will be terms set within your contract limiting any additional amounts you can allocate towards your mortgage payments. It is important to speak with your mortgage provider ahead of time to have a clear idea of what your options are and ensure you avoid paying any penalties!
Tip #3: Make a goal to pay back a little extra each month
Would you be able to afford putting an extra $20 towards your mortgage payment each month? What about $50? By increasing your monthly payments, you are able to decrease your mortgage obligations. Therefore, by contributing smaller increases, you can avoid putting too much strain on your financial position. Even by adding an extra $15 each month, you will reduce your mortgage obligation by $180 a year. This will quickly add up year over year! Additionally, by paying slightly more each month, you’ll reduce your overall interest payments which, also saves you money!
Tip #4: Leverage any excess money you come across
A great way to pay off your mortgage faster is by increasing your payments. Tax returns, bonuses, raises, or unexpected investment returns are great sources of income that can make a big impact in paying off your mortgage. By allocating these sums towards your mortgage payment, you are able to pay off a significant amount of your principle in one transaction. Furthermore, since you were not relying on this additional, unexpected income for your daily expenses, your financial position will not change by using this income for your mortgage payments.
Finding ways to pay off your mortgage faster can be beneficial for all Canadians! There are several ways to get creative when paying off your mortgage. Talking to a mortgage broker is always the right move to figure out all of your options. For any other questions regarding your mortgage, please reach out at any time! Schedule a free consultation or give me a call.