Paying down your mortgage will not only lower your debt, but it will also reduce the amount of money you spend on interest.
By: Scott Nazareth
Your mortgage is one of the biggest and longest-running debts you pay. Your monthly payments can consume a big chunk of your earnings, reducing your cash flow. Paying down your mortgage will not only lower your debt, but it will also reduce the amount of money you spend on interest.
You can pay off your mortgage fast with lower interest rate loans and short amortization terms. Amortizations can range from thirty to thirty-five years. Many homeowners opt for longer time frames to lower their regular payments, but those increase the total amount of interest paid over the life of the mortgage contract. If a short timeline is not financially viable, here are some ways you can pay off a mortgage fast.
Lump Sum Payments
Paying a lump sum payment on your mortgage will shorten the time it takes to pay off your loan. Whether you put extra money down monthly, quarterly or yearly, the long-term savings will be substantial.
Every year, you can pay a lump sum of up to 20% of the outstanding principal. An annual lump sum payment will not only reduce the total amount of interest you pay, but it can also shave years off of the life of your mortgage. For example, if you paid 10% of the remaining mortgage each year for five years, you will have paid 50% of the mortgage and halved the projected amortization period.
Accelerated Payment Plans
If your mortgage payment schedule only includes monthly payments, consider opting for an accelerated payment plan. An accelerated payment breaks your monthly bill into smaller amounts that are withdrawn weekly or biweekly. Accelerated plans with more frequent installments reduce the interest you’d pay over time. That is the equivalent of making one extra payment each year.
Same Payment on Lower Interest Loans
If your mortgage renewal has a lower interest rate, request to keep your monthly installments the same as they were with your previous rate. By maintaining a consistent payment plan on a lower interest loan, you will be paying more of your mortgage without impacting your budget. That will reduce the total interest you pay and the length of your mortgage.
Increase Mortgage Payments
When refinancing your mortgage, ask to increase your payments rather than accept the monthly rate set by the lender. Even a small increase of $100.00 more per month will lower the total interest you pay and take years off the life of your mortgage.
A home loan is typically the biggest debt most Canadians have, taking much of your hard-earned money, especially considering the interest fees. There are many simple and highly effective measures you can take to pay off your mortgage fast. Talk with a mortgage broker about the best mortgage renewal terms as well as strategies to lower debt so that you can be debt-free sooner.
To find out how you can pay off your mortgage faster, contact one of our mortgage brokers for your free consultation by clicking on our ‘Apply Now’ button, emailing us at firstname.lastname@example.org, or by calling #647-795-8700 ext. 0 today.
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