Pay Off Your Mortgage Faster
2019-05-17 | 21:01:12
HOW TO SHORTEN THE LENGTH OF YOUR MORTGAGE & MINIMIZE THE COST OF BORROWING
Can you imagine life without a mortgage? Imagine the extra cash burning through your pockets. And the satisfaction of knowing your home is truly yours — without any financial obligations. There are several ways to pay down your mortgage and get out of debt sooner.
Take advantage of prepayment privileges
Pay off your home quicker with mortgages that have prepayment privileges.
Lenders offer an open, closed and convertible mortgage. Open mortgages usually have higher interest rates than closed mortgages, but they're more flexible because you can prepay open mortgages, in part or in full, without a prepayment charge. Closed and convertible mortgages often let you make a 10% to 20% prepayment. Your loan agreement explains when you can make a prepayment, so get the details from your lender beforehand. Also, decide which privileges you want before finalizing your mortgage.
Increase your payments:
Increasing the amount of your regular payments, even by a small amount, may help you pay off your mortgage faster. You may only be able to increase your payments by a certain amount each year. The amount will be written in your mortgage contract. If you increase your payments by more than your prepayment privileges allow, you may have to pay a prepayment penalty.
Choose accelerated weekly or accelerated bi-weekly payments:
If you switch to an accelerated weekly payment schedule, you'll increase your mortgage payments from 12 to 52 payments annually — a payment every week instead of monthly, and one extra monthly payment every year. If you switch to an accelerated bi-weekly payment schedule, you’ll increase your mortgage payments from 12 to 26 annually — a payment every 2 weeks instead of monthly, and one extra monthly payment every year.
Shorten your amortization period
The amortization period is the length of time it takes to pay off a mortgage, including interest. The shorter the amortization period, the less interest you pay over the life of the mortgage. You can reduce your amortization period by increasing your regular payment amount. Your monthly payments are slightly higher, but you'll be mortgage-free sooner. Find out how much you could save by shortening your amortization period with our mortgage payment calculator.
Pay a big lump sum before you renew
When it's time to renew your mortgage, pay as much as possible. All mortgages are open at renewal so you can pay as much as you want on your mortgage at this time.