Everyone who has a mortgage wishes they didn’t. They’re just waiting for the day that their mortgage is paid off and they are living home free.
Most mortgages in Canada are between 25 and 35 years long, but here are 5 tips that you can use to pay off your mortgage faster;
- Pay bi-weekly instead of monthly. A monthly payment equals 12 payments per year. If you divide your payment in half, and pay every two weeks, you will make 26 bi-weekly payments, which equals 13 monthly payments. That extra payment every year can help you pay off your mortgage up to 4 years early.
- Many people come into unexpected money once in a while. Perhaps a bonus at work, or a small inheritance from a relative. Most mortgages have a prepayment clause which allows you to pay up to 10% extra every year. Even a small prepayment of $1,000 made at the beginning of a mortgage can save you over $20,000 in interest and help you pay off your mortgage years early.
- Round up your payment. If you don’t have the money to pay a whole lot extra, you can still do a little bit. If your mortgage payment is an odd number, you can ask your lender to round it up. Instead of paying $781 a month, ask them to make it $800. That extra little bit will save you thousands in interest over the life of the mortgage.
- Make a RRSP contribution and then use the tax refund to pay down your mortgage. If you do this every year, you will have a better retirement, with money to spend while you live in your paid off house. Double Bonus!
- Shorten your amortization. Choosing a shorter mortgage amortization will save you thousands of dollars in interest, without raising your payment substantially. Next time you renew your mortgage, ask your lender how much the payments would be if you knock 3 or 5 years off the amortization.
Talk to your lender and discuss your options. They will be happy to make suggestions that will get you to your financial goals sooner.