Paying off your mortgage sooner than later

You have picked your amortization period – but there are still ways to pay off your mortgage sooner than later. Basically there are 4 ways you can work to shorten the time before you own your home free and clear.

1. Frequency of mortgage payments

The faster you pay down the balance of your mortgage, the less interest you pay. One of the easiest ways of getting out of your mortgage faster is to increase the frequency of your payments. Rather than choosing a monthly payment, choose a bi-weekly or weekly payment frequency, then divide the monthly payment by the new frequency and you will pay-off your loan faster and pay significantly less interest.

2. Lump sum payments at renewal

When determining your savings budget make sure you set aside a bit each month to make a lump sum mortgage payment. Some products allow one lump sum payment on the anniversary date and some only at renewal. Either way, by taking extra cash and putting it towards your mortgage you are on your way to being mortgage free faster.

3. Accelerated or extra payments

Like a lump sum payment, making extra payments or increasing the size of your payment means you are paying down your balance faster and paying less interest in the long run. Many products allow accelerated payments, by increasing your regular payment amount by the equivalent of an extra monthly payment, spread across your regular 12 payments. Check with your mortgage lender to see if your mortgage allows this type of option. If it does, it makes good sense to take advantage of it.

4. Mortgage term

The term of the mortgage refers to the period of time an interest rate is used. Variable rate mortgages have no fixed term and fixed term mortgages can go from 6 months to more than 10 years. Generally speaking, the longer the term the higher the interest rate that will be applied to the balance. And the more interest you will pay. Choosing a term can be tricky and very much depends on your appetite for risk. When mortgage rates are forecasted to stay low, then shorter terms are attractive. But if mortgage rates are expected to rise, then fixing at a longer term can save you money.

If your financial circumstances improve from one renewal period to the next, you also have the option of shortening your amortization period. Remember, just because you picked your amortization period when you first negotiated your mortgage does not mean you have to keep it for the life-time of your loan. Along with the term and interest rate it is one of the features that can be changed at renewal.

Not sure what to do with your mortgage – come in, call or email us – even if your mortgage is at another financial institution. We welcome the opportunity to work with you so that you can be mortgage free faster.