Paying off your mortgage ahead of schedule can provide financial freedom and peace of mind

Signing up for a mortgage may seem like a life-time commitment.  For most of us, it is the biggest debt we’ll ever take on.  What many people may not realize is just how big a dent they can put in their mortgage by making pre-payments. Here are several strategies you can use to become mortgage-free sooner.

1. Add a bit to your monthly payment

Most of us can find an extra $50 per month by cutting out a restaurant meal.  Add that money to your mortgage 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. 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.

2. Make bi-weekly mortgage payments

Instead of making monthly mortgage payments, consider switching to bi-weekly accelerated payments. By making half of your monthly mortgage payment every two weeks, you’ll make an extra payment each year without even noticing the difference. This can help you pay off your mortgage faster and save on interest costs. Is the bi-weekly payment always better? No; in fact in certain circumstances it’s better to tackle those extra payments differently. But in many cases, it is indeed a great way to pay off your mortgage more quickly.

3. Make a yearly lump sum payment

If you come into extra money, such as a tax refund or bonus, consider making a lump-sum payment towards your mortgage. Even a one-time payment can help reduce your principal balance and shorten the term of your mortgage. 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.

4. Make a larger prepayment early in the life of your 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.

Make paying off your mortgage a real goal

Becoming mortgage-free sooner is a realistic goal that can provide financial freedom and security. By implementing these strategies and staying committed to your goal, you can pay off your mortgage much faster. Please get in touch if you would like a mortgage checkup and to have a conversation about your own financing goals!

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