Looking to pay your mortgage off faster? Shave years (possibly even decades) off your mortgage loan with the help of these five easy-to-follow strategies:
1. Take Advantage of Increased Payment Options
Upping your monthly payments, even by the smallest increment, can make all the difference in helping you become mortgage-free faster. While your ability to increase your payments will depend on the terms and conditions outlined in your mortgage, many lenders include prepayment privileges in their contracts.
Keep in mind, however, that if you pay more than the prepayment privilege allows, you may be required to pay a prepayment penalty. Your increased payments will also likely apply until the end of your mortgage term.
2. Make Lump-Sum Payments
Many mortgage lenders also allow borrowers to make lump-sum payments. Simply put, a lump-sum payment will enable you to put money directly towards your mortgage principal, based on an annual percentage limit. Exactly when you’re able to contribute a lump-sum payment will vary according to your mortgage terms but can generally be made:
- At the end of the term
- Specific times or dates in your term or contract
- Before the end of your term
3. Switch to Accelerated Payments
Accelerated payments refer to the frequency in which a borrower chooses to make their mortgage payments as a means of paying their loan off faster. Unlike regular, average monthly payments, accelerated payments allow you to make bi-weekly or even weekly mortgage payments – ultimately saving you thousands in interest charges AND resulting in the equivalent of one extra mortgage payment a year.
Typical mortgage payment frequencies include:
- Monthly
- Bi-weekly
- Accelerated Bi-weekly
- Weekly
- Accelerated Weekly
4. Renew Your Mortgage
Next time your mortgage is up for renewal, you may be eligible for a lower interest rate. By opting for this lower rate yet keeping your monthly payments the same, you will be able to pay your loan off much faster than anticipated.
Another option come renewal time may be to blend-and-extend your mortgage. In this case, your lender may allow you to combine your existing mortgage rate with a new, lower rate in exchange for the extension of your term. Here again, by keeping your monthly payments the same, you will be able to pay your mortgage off faster, despite the extension.
Note: Opting to renew your mortgage early may result in pre-payment penalties, depending on the conditions outlined in your mortgage contract. You’ll also want to be sure to shop around (ideally with a mortgage broker) before your renewal date to secure the best deal possible.
5. Bank Anything Extra
Whether it’s your tax return, a monetary gift or your inheritance from dear old Aunt Esther, be sure to bank any financial windfalls that come your way, putting them towards your mortgage loan. Other means of saving to consider might include work-related bonuses or raises or investment gains. Many homeowners also opt to rent out a room or invest in a separate income suite as a means of chipping away their mortgage loan principal at a much faster rate.
Are you thinking about buying a home in Edmonton? Take advantage of my Ultimate Home Buyer’s Guide! In it, you’ll learn everything about the home buying process from start to finish, including down payment saving tips, mortgage pre-approval advice, determining what you truly want and need in a home and much more!
Related:
- 6 Key Reasons Why You NEED a Mortgage Pre-Approval
- Buying a Home: 14 Hidden Costs to Prepare For
- How to Get Approved for a Mortgage in 5 Easy Steps
Photo credits: freepik.com
Posted by Kevin Klein on
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