Paying Off Your Mortgage Loan Early
When you buy your first home and you see that 30 year term, it seems like you'll be paying for your home forever. There are ways to shorten your mortgage term without refinancing.- Pay a little extra every month towards your principal. You can usually add a dollar amount that specifically goes towards that and even if you can only afford $20.00, send it in. That is an extra $240.00 towards your principal each year.
- Make one extra full payment a year. By doing this simple thing, you reduce your loan term by YEARS.
- Don't spend money on frivolities. If you have extra cash on hand, invest it in your equity or in home improvements - especially the kitchen and bathrooms which will increase your home's value.
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You can pay off mortgage early by following the aforementioned tips. However, do consult your mortgage lender before planning to pay off mortgage early. Ask the lender if you have to pay a mortgage prepayment penalty. Find out the penalty amount too. If the penalty amount is not too high, then you can easily follow the tips and pay off mortgage early.
ReplyDeleteA CMHC survey last years found that 68 per cent of recent homebuyers feel there is a strong chance that they will be able to pay off their mortgage sooner than their current amortization schedule. And, since taking out a mortgage, 27 per cent of recent homebuyers have either made lump sum payments to their mortgage, or increased their regular payment amounts.
ReplyDeleteHere are a few easy ways I plan to tackle my mortgage:
Accelerated payments
This is the most popular way to pay off a mortgage faster. Instead of paying your mortgage 12 times per year (monthly), you will pay your mortgage every two weeks (bi-weekly), for a total of 26 payments each year. Paying your mortgage on a bi-weekly basis (instead of monthly) will save you tens of thousands of dollars over the life of your mortgage.
Round up the payments
Every dollar counts when it comes to chipping away at your mortgage. The more you can pay, the quicker you will pay off your loan – and the more you will save on interest. For example, if your bi-weekly mortgage payment is $567, consider rounding up to $600. The extra $33 won’t break your budget, but it will help you considerably in the long run. Check out this handy Moneyville mortgage calculator, to see how much you will save by increasing your payments by just a few dollars.
Put ‘found’ money towards the mortgage
Unexpected sources of money are ‘found’ money, and can easily be applied to the mortgage amount without any impact to your budget, because it wasn’t planned money. This can be anything from a bonus, to birthday money.
Contribute to your RRSPs
By contributing regularly to your RRSPs, not only are you able to save for your future, but you can also take the tax refund you receive and put it directly towards your mortgage. The best of both worlds!
Make a lump sum anniversary payment
Most mortgages allow you to make extra payments each year, which is applied directly to the principal. Take advantage of this by making a lump sum payment each year on your mortgage anniversary date. Even if the amount is as small as $100 – every little bit counts.
Raise your payment as your salary increases
If you receive a raise, instead of increasing the cost of your lifestyle in the short term, consider throwing the extra amount you make onto your mortgage instead.
Stay informed
Once you have a mortgage, it is so easy just to forget about it because it’s on automation. But by being an informed homeowner and keeping up-to-date on interest rates and new mortgage options, you could potentially save a ton of money.
Paying off your mortgage early isn’t for everyone. But for me, owning my own home and living a mortgage-free life will be worth all of the hard work and sacrifice.
How are you paying down your mortgage faster?
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Mortgage loans generally have a maximum term, that is, the number of years after which an amortizing loan will be repaid.
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Pay off Mortgage Early Calculator helps you in calculating the amount of debt remaining and calculate your mortgage payments and see the way one can save thousands of dollars in interest costs - while paying down the mortgage sooner.
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