Paying off your mortgage may be the best investment you can make. A survey conducted in 2013 by Canada Mortgage and Housing Corporation (CMHC) found that 68% of homeowners felt they could pay off their mortgage early. Last year a Scotiabank poll found that almost two-thirds of mortgage-holders agreed they could pay off their mortgage faster without impacting their lifestyle. Here are some ways to save some serious money and become mortgage-free faster. It only takes a few small steps and saves you thousands of dollars in the process.
Accelerate your payment frequency
This is popular. If you're making monthly payments on a $300,000 mortgage with a 3% interest rate, amortized over 25 years, it will cost you $125,920.44 in interest. By increasing your payment frequency to accelerated bi-weekly payments, you will shave nearly three years off of your amortization schedule, and save $16,058.57 in interest.
Round up your mortgage payment
This is pretty painless. Every dollar counts when it comes to paying off your mortgage. If your accelerated bi-weekly mortgage payments are $543, consider rounding up to $600 instead. The extra $57 will save you thousands of dollars in interest over the term of your mortgage and you'll barely notice the difference in your monthly budget.
Refinance to a shorter-term amortization
You may be able to refinance into a mortgage with a lower amortization. Your payments will be higher on a 15-year loan, but perhaps not as high as you think, especially in the current low-interest environment.
Make lump sum payments
Adding just $1,000 extra to your mortgage per year will allow you to pay it off years sooner and, combined with accelerated bi-weekly payments, chip thousands of dollars off the interest you pay for your home.
A lower interest rate
With mortgage rates at all-time lows it doesn't hurt to negotiate a better rate. The difference between a 2.59% rate and a 3.2% rate adds up to thousands of dollars in interest over the remaining term of the mortgage.
Interestingly, the Scotiabank poll also showed that 21% of mortgage holders have not taken any steps to pay down their mortgage for the following reasons:
Don't have available funds
Have other payment priorities
Don't know what steps to take
The freedom that being completely debt-free brings is a dream for many Canadians. If you're unsure of what your next step should be, call me. Together we can review your mortgage, look at your financial picture and devise a mortgage-reduction plan that works for you.