Want to shave some years off your mortgage and save money in the process?
Here are some basic strategies to help you on the way
As soon as we get a mortgage, pretty much like every credit, we would love to be rid of it. We are always looking for ways to save interests and fees and if possible to finish paying faster. In mortgages, the fear is bigger as we are now looking possibly 10, 20 or 25 years to pay it off, it seems to stretch forever. Actually, most don’t even consider possible to have a life without paying mortgage and think of this as a far off dream. The reality is that there are ways to save time and pay your mortgage much sooner than you ever considered without breaking your savings. It all depends on who you get the mortgage with, the conditions in it and a little bit of willingness to make it happen.
If your mortgage lender allows it, the following are some simple and very effective ways to save years and money from your mortgage:
Make lump-sum payments whenever possible.
Apart from other options, most banks offer opportunities to make lump-sum payments on a mortgage. If you can make at least a lump-sum payment of just 2% of your mortgage, this is all it takes for most people to pay off their mortgage years ahead of schedule. Great opportunities to take advantage of this strategy are annual bonuses or tax refunds. And again, you get to save interests.
Go from monthly to biweekly or weekly.
Most people choose to pay their mortgage on a monthly basis. One option for you may be to switch your payments to a biweekly or weekly payment. As a result, you’ll actually make 26 or 52 payments a year. Technically, you will end up paying a couple of weeks more in the year and it will really not affect your expenses too much, but it can definitively reduce your mortgage interests and its length.
Weekly and bi-weekly mortgage payments is one way of forced savings and these options are very attractive for people whose employment pay days match the payment periods.
Choose a shorter period of amortization
In addition to the strategies listed above, some people choose to reduce their amortization period from the industry-standard 25 years to 10, 15 or 20 years instead. This will give you slightly higher mortgage payments but very important interest savings over time. Consider a slightly higher mortgage, maybe even look at it as rent increase and over time, you will finish paying your mortgage much faster and the significant savings will allow you to do more with your money.
Pay more to pay less.
Depending on your financial institution, some allow for changes in the amounts of mortgage payments which translate into saving interest and reducing the mortgage’s life. This will save money and reduce the length of your mortgage.
TD Canada Trust allows its customers to increase their payments by up to 100% of their regular payment amount at any time throughout the term of the mortgage. Most people find that it is quite easy to adjust their lifestyle to a slight increase in their mortgage payments and this is one of the reasons I recommend getting your mortgage with TD.
If you have a mortgage and are looking for a way to save time and money, contact me, your local mortgage specialist. I’ll be glad to meet with you to discuss other possibilities and options tailor suited to you.
