Want to be mortgage free sooner? Pre-pay now! Mortgage Strategies - Ingrid McGaughey Mortgage Broker

Want to be mortgage-free sooner? Pre-pay now!

Want to be mortgage free sooner? Pre-pay now! Mortgage Strategies - Ingrid McGaughey Mortgage Broker

Signing up for a mortgage may seem like a life-time commitment. What many people may not realize is just how much sooner they can be mortgage free by making pre-payments. Making extra payments or larger payments early on can add up to significant interest savings and shorten the life of your mortgage, leaving more money available for RRSPs and other investments, as well as improving your cash flow for changing lifestyle needs.

Pay down your mortgage sooner and be mortgage free faster with these tips:

Add a bit to your monthly mortgage payment

Most of us can find an extra $50 per month by cutting out a restaurant meal or skipping Uber Eats once or twice. Add that money to your mortgage payment and you’re saving a lot in interest down the road. Most lenders allow you to increase your payment amount by a certain percentage every year.

Make a yearly pre-payment

Paying an extra one or two thousand toward your mortgage principal once per year, on the anniversary date of the mortgage, could mean significant savings over the life of the loan. For many borrowers, the money for such a prepayment comes from a tax return.

Make a larger prepayment early in the mortgage

Lump-sum mortgage prepayments have a much greater impact on the total amount of interest you’ll pay, the earlier they are made. Check your mortgage contract to see how much you can pay down your principal, and how often you can do so. One major opportunity to do this is after the dust has settled on your home purchase or refinance. If you have money left over, make an extra payment toward your mortgage right away.

If you’re paid bi-weekly, sign up for “bi-weekly accelerated” payments

Sneak in an extra payment every year. If you split your monthly payment in half, and pay that amount every two weeks, that does it! This can save your thousands in interest and allow you to pay off your mortgage years earlier. Is the bi-weekly payment always better? Not necessarily. Check out my post that dives into the explanation of the pros and cons.

And, as always, please contact me if you have any questions or would like to further discuss your options!

Photo [c] Patchakorn Phomin for vecteezy.com

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