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How to pay off your Mortgage Faster

General Leslie Morris 30 May

Congratulations! You are now the proud owner of a new home! You also likely own a rather intimidating mortgage as well. That debt may seem like a daunting mountain you’ll be chipping away at for years, but you could actually pay it off faster than you realize. Here are five hot tips from mortgage-handling pros to get you in the free and clear fast.

Mortgage Broker Kitchener

Pay more than the minimum.
Let your mortgage servicer know ahead of time that you plan to pay vigorously. They will most likely help you put together a more aggressive payment schedule. If you plan to do all the calculating yourself, still make sure you let the servicer know to expect higher than usual payments. Some require a notation that extra money should be applied toward your loan. Always check your statement afterward to make sure the right funds were applied.

Pay more often.
If your mortgage lender offers a bi-weekly payment schedule, take it! Not only will this allow you to make a half-payment every other week, it also cuts down on the amount of interest you’ll be paying too. Check with your lender first to see if they offer bi-weekly payments, otherwise your payment may be held in escrow until you make the other half payment, which defeats the whole purpose.

If a bi-weekly payment schedule doesn’t work for you, consider making one extra payment per year instead. The best way to do this is save a twelfth of a regular payment every month. By the end of the year you will have a whole extra payment to put into your loan. It’s not as fast as more aggressive payments, but you will still save thousands in interest and still knock years off your term.

Set goals and stick to them.
Make your payoff goal challenging but reasonable; the easier the goal, the longer you will probably stay in debt. How fast you will pay off your mortgage depends on how many sacrifices you are willing to make. Some smart homeowners have managed to pay off a 15-year loan in as little as 2 years, but they also made a lot of cuts to their expenses. Which leads us to the next tip…

Be mindful of the “little things”.
Buying lunch every day may be convenient, but it also cuts into the cash you could be putting towards your payoff. In fact, taking a sack lunch from home could save you up to $1,000 a year! That’s $1,000 you could knock off your mortgage. Other big savings from small changes include making coffee at home or cutting down on new clothes shopping. More proactive payers put all of their extra income – from tax refunds, bonuses, or even second jobs – toward their loans.

Consider refinancing your mortgage.
If you have a 30-year or longer loan, consider refinancing it to a shorter term with a lower interest rate. This works particularly well if you already plan to make higher, more frequent payments. It’s important to look out for a good deal, at least one percent lower interest than you are already paying. If you aren’t already making higher payments, a shorter term will drive up the cost of your monthly payment, so make sure you can afford it. However, you could save thousands off interest in the long run.