Paying off your home shouldn’t take a lifetime or 25-40 years like the original amortization you initially took upon. By planning ahead and sticking to the plan, you have the opportunity to pay your mortgage off sooner and become completely debt free.
Here are 7 ways to pay off mortgage sooner and decrease the amortization and interest costs off your mortgage:
1. Choose a mortgage with a prepayment option. Not all mortgages are created equal. A prepayment option gives you the right to prepay specified amounts of your mortgage principal so the total payment amount pays down your debt directly without a single dollar going towards paying the bank’s interest. All banks offer different amount for a prepayment option so do your research.
2. Reduce your amortization period. By shortening your amortization period to less than 25 years you can create huge interest savings. By the way, the longest amortization period you are able to get in Canada today is 30 years.
3. Increase your regular mortgage payment. Increasing your regular mortgage payment helps you reduce your mortgage principal faster, which means you save interest. The idea is the same as with option 2 – reduce the principal on your mortgage directly.
4. Increase your mortgage payment frequency. If you increase the frequency of your mortgage payments from monthly to accelerated bi-weekly, you are making one additional monthly payment.
5. Invest your unexpected cash. If you find yourself with more money than you anticipated – tax refund, salary increase, bonus at work, you should consider making a lump-sum mortgage payment against the principal. It’s a win-win situation – your mortgage principal will decrease and you won’t have to change your spending habits.
6. Keep your mortgage payments high. When the time comes to renew your mortgage, keep your mortgage payments high even if you’re tempted by lower interest rates and a lower monthly payment. If you stick to your original plan, you’ll pay off your mortgage faster and enjoy huge interest savings over the life of your mortgage.
7. Get a mortgage helper. When buying a house look for the one with a mortgage helper. Once you receive a steady income from it put it towards the mortgage.