Pay off your Mortgage
If you are hoping to pay off your mortgage faster than your loan states, here are some helpful tips.
First, you need to understand your loan rules and attempt to maximize your money. To do this, follow some simple steps listed below.
1. Talk to your bank/mortgage broker and ask how much the principal can be added on. Lots of companies allow you a 10% principal on anniversary dates. Some will even allow you “double-up” monthly to pay off faster.
2. Ask about the frequency of your payments. If you’re only making a single monthly payment, try to switch to a bi-weekly or weekly one. Depending on how good you are at budgeting your money, with a higher frequency of cash, you will pay less interest during your mortgage, which will drop years off of it.
If you are concerned with being able to make more frequent payments, you will need to “find” more money to pay them with. The secret to this is cutting back current expenses where you can and creating “more” money to work with.
I paid off my mortgage in 12.5 years. I’m not sure I could it this early if I started today with the current housing market across Canada. My starting goal was to be mortgage-free by the time our oldest child graduated high school. We surpassed the goal by one year! We paid off our house when my oldest child was in Grade 11. One of the ways I was able to do this was by cutting expenses, but also putting down a large down-payment of 25%.
Where can you find the extra money?
Here are some ways you can find some extra money to pay off faster:
Tax Returns – We put a few years down on principal payments using our tax return funds.
Job Bonuses – Anytime there was a bonus at a job, it was applied towards payments since it wasn’t money that was expected or budgeted for.
We made a lot of “debt payments.” This is done by applying other payments we had been making on other loans, such as my SUV and applying it to the mortgage after it was paid off. This way, we did not feel a change in our payments, but we made sure to use that “extra” money to get our mortgage paid off faster. I drove that SUV for five years with no payment and no change in cash going out.
Increase your income percentage. Each time we got a raise at work, we increased our payment. Each year, when my husband got a lift, I added an extra $50 or $100 per month onto our principal payments. This gave us an additional 1,200 dollars we paid towards the principal. In those terms, it doesn’t sound like much, but over ten years, that equals an extra $12,000 onto principal!
We locked in at lower interest rates when we could. Just merely paying attention to re-financing options offered by your lender can make a lot of sense.
Cutting Your Spending
Start looking for other ways to cut extra expenses that are frivolous such as weekly dining out. Instead, merely doing bi-weekly or monthly dining out can save you an additional $50-$100 to apply to your mortgage principal.
Look at Your TV and Telephone plans and see if you can switch plans to save you money