Pay Off Your Mortgage Faster
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When it comes to homeownership, many people dream of the day they will be mortgage-free.
While most mortgages operate on a 25-year amortization schedule, there are effective ways to pay off your mortgage quicker! Here are some strategies to consider:1. Review Your Payment Schedule:
Take a look at your payment schedule to start paying down your mortgage faster. Consider moving to an accelerated bi-weekly payment schedule. Although this leads to slightly higher monthly payments, it results in approximately one extra payment per calendar year. By doing so, you can reduce the total amortization by multiple years.
2. Increase Your Mortgage Payments*:
Making a simple change today can have a significant impact on your mortgage. Most lenders offer pre-payment privileges that allow you to increase your payment amount without penalty. This increase allowance can range from 10% to 20% of the original payment. If you’ve received a raise or have extra funds, consider putting them directly into your mortgage. This helps reduce your mortgage balance without requiring you to change your spending habits.
3. Make Extra Payments*:
If your mortgage allows for pre-payment privileges, take advantage of this option. You can make an annual lump-sum payment of 15-20% of the original loan amount. Some mortgages even allow you to increase your regular payment by this pre-payment privilege percentage. Utilize any additional money you have, such as a work bonus or inheritance, to accelerate your loan repayment.
4. Negotiate a Better Rate:
Depending on whether you have a variable or a fixed rate mortgage, consider exploring the possibility of getting a better rate. This is particularly advantageous when your mortgage term is up for renewal. With interest rates potentially decreasing, it could be an ideal time to adjust your mortgage and save. You can negotiate with your current lender or switch to a new one offering a lower rate (known as a switch and transfer).
5. Refinance to a Shorter Amortization Period:
Lastly, evaluate the term of your mortgage. When your mortgage is up for renewal, consider refinancing to a shorter amortization period. While this leads to higher monthly payments, it reduces the amount of interest paid over the loan’s life. Assess your affordability and desired timeline for being mortgage-free to determine the best new amortization schedule.
Consistently applying these strategies over time will help you save money, pay less interest, and pay off your mortgage years sooner!
*These options are only available for some mortgage products. Check your mortgage package or reach out to me to ensure these options are available to you and avoid any potential penalties.
If you’re looking to pay your mortgage off quicker, don’t hesitate to reach out to me today! I can help review the options above and assist in choosing the most effective course of action for your situation.
