What would you do with an extra $1000 or more a month? For many Canadians, the easiest way to discover that is to pay off their mortgage. And while it can feel like it is taking forever to pay off, there are some ways that you can pay off your mortgage faster so that money can stay in your pocket.
Now – full disclosure – some of the strategies that I’m about to discuss involve paying extra or making extra payments. But before you start doing that, you need to get in touch with your lender to see what their rules are regarding that. Many lenders allow homeowners to pay extra up to a certain amount or only at certain times of year. If you break these rules, you could find yourself facing penalties.
Strategy #1: Make Bi-Weekly Payments
Instead of paying monthly on your mortgage, consider setting up bi-weekly “half payments” instead. If you pay bi-weekly, you’ll be making 26 half payments over the course of the year instead of 12 full payments. That amounts to one additional full payment each year, and while it might not seem like much at first, that extra payment every year can really accelerated how quickly you are able to pay off your principle.
Strategy #2: Pay Extra
There are various ways that you can pay extra money on your mortgage and any extra you are able to pay is going to mean getting rid of that debt faster. One strategy is to round up your payments. So say you are paying $575 every two weeks, you could round up your payment to $600.
Another way to pay down your mortgage faster is to make extra payments at the time of year your lender prescribes (these are called anniversary payments). One way to do this is to make sure you contribute a healthy amount of money over the course of the year to your RRSP. In many cases, doing so will help you get a tax refund that you can then put toward your mortgage. Using this strategy has the dual benefit both of helping you pay off your mortgage faster as well as saving for retirement.
Strategy #3: Shop Around Before You Renew
If you want to pay off your mortgage as quickly as possible it is important to get the best rate possible. When your mortgage comes up for renewal, your lender will likely send you a renewal letter with the rate that they are offering. Heads up – you can probably do better.
Before you renew your mortgage, it is always a good idea to chat with a mortgage broker who can shop around for you or even negotiate a better rate with your current lender. Remember, even a small improvement in your interest rate can help you to pay off your mortgage years sooner.
Are you interested in learning more strategies about how you pay off your mortgage faster? Call me today and I’d be happy to speak with you.