If you intend to pay off your mortgage as quickly as possible, then youa��re in the majority; a survey released in 2008 by the Canada Mortgage and Housing Corporation claims that more than 75 per cent of survey respondents who bought a home in the last year said being mortgage-free sooner was their goal.
Of course wanting to be mortgage-free sooner is easier said then done, but there are some tips that can help you along the way to reach your goal quicker.
Make the largest down payment you can afford.
Fact is, the more you put down the less youa��ll have to pay back; not just in the principal but in interest too.
Make more mortgage payments.
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There are two ways to go about doing this; both will save you some money along the way but one more so than the other.
Your first option is to pay twice a month (or whatever frequency works best for you) the total you would normally pay on a monthly payment plan. For example, if your monthly mortgage payment is $1,000 you can opt to make two payments a month of $500 each. You’re not paying any more than you have to each month, although you will save on interest by making part of your monthly total payment early.
Your second option is to pay weekly or bi-weekly payments in lieu of a monthly payment. Why does this save you money? Well, not only will you save money on interest like you would with the first option, but ita��s also a way you might not notice that you actually are making a couple of extra payments each year. Leta��s say for example, your monthly mortgage payment is $1,000 for a total of $12,000 per year. If instead you decide to pay $500 every two weeks, youa��ll actually end up putting $13,000 a year against your mortgage.
Make pre-payments or anniversary payments.
Even if you have a closed mortgage, most mortgages allow you to make a�?extraa�? payments, once a year, for up to 20% of the mortgage owed. This money is applied to the principal, saving you money in annual interest costs.
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When interest rates drop, keep your payments the same.
If interest rates decrease when it is time to renew your mortgage, consider keeping your payments the same; since less money will go towards paying interest, more will go to paying down the principal.
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Choose a shorter length of time to repay your loan.
Look at all your amortization options to see how choosing a 15-year period versus a 20-year period versus a 25-year period will affect your payments and interest costs. Your mortgage payments will be higher, but youa��ll pay far less interest over the course of the loan. Do this exercise at the end of each mortgage term as what may have worked for you 5 years ago, might not be the best option for you now.
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