Whether you’ve been paying off your mortgage for 5 or 15 years, it’s better to find ways to pay it down faster than your original amortization period. The financial freedom of being mortgage-free can be achieved through various money-saving practices that are slow and steady, but can end up shaving years off of your mortgage.
Here are some helpful tips for paying off your mortgage faster.
1. Cut Down on Monthly Expenses
This is easier said than done. We become so accustomed to buying our morning coffee or taking our loved ones out to weekly dinners that we forget—or ignore—the fact that these little expenses can add up. Just as you budget for your bills, you might want to consider budgeting for your other expenses. Some things are easy to cut back on and can also end up saving you tons of money that can be put toward your mortgage, such as:
• Drinking from a reusable water bottle
• Bringing coffee from home
• Preparing lunches for work
• Having more family dinners at home
Other expenses may seem like a major sacrifice, so it’s up to you to decide how far you’re willing to go to save money. We don’t suggest eliminating all the little luxuries you enjoy—the point of paying off your mortgage faster isn’t to strip away all the activities that make life fun. But if you’re determined to shorten your amortization period, consider selling one of your cars if you have two, cancelling your monthly subscriptions (i.e. magazines, Netflix, etc.), and taking your vacations closer to home.
2. Make Do and Mend
Closely related to the previous point is the philosophy of “make do and mend,” which is another way of saying adopt a frugal lifestyle. Keep your winter boots for another year; grow your own kitchen herbs, repair ripped jeans, and take your bike to work. It’s easy to underestimate frugality because we have a harder time visualizing the financial results.
Trust us: it all adds up!
You’ll soon notice more money sitting in your checking account at the end of the month; money you can put towards your mortgage!
Visit a Mortgage Specialist
Mortgage specialists don’t just help people buy a home. They also help them refinance their mortgage after their term is up. A mortgage specialist—most likely the same one you used to buy your home—can help you pay down your mortgage faster in two ways:
• Lower your interest rate
• Decrease your amortization period
If you decide to shorten the length of your mortgage loan, you will have to pay higher monthly mortgage rates, but you could end up shaving years off your mortgage just by increasing your payments by a few hundred dollars every month, not to mention saving thousands of dollars on interest.
3. Pay Off Other Debts
The trick to paying off your debts as quickly as possible is to focus on the one with the highest interest rate. The average yearly interest rate of credit cards in Canada is 11.99%, but store credit cards can go up to 30%, not to mention they come with yearly fees. With some mortgages lower than 3% in Canada, it’s costing you more in the long run to hold onto credit card debt than it is to have a mortgage.
Pay off your credit cards, student loans, car loans, and lines of credit as soon as possible. Don’t stick with paying the minimums; your debt will drag on for years, causing you to pay hefty interest payments that could be used towards lowering your mortgage. We suggest focusing on these debts first before you pay extra on your monthly or bi-weekly mortgage fees.
4. Switch to Bi-Weekly Payments
In a calendar year, making bi-weekly payments equal to an extra mortgage payment is worth the switch. The best part is that switching is easy because you can schedule your bi-weekly loan payments to coincide with your paycheque.
5. Start Earning Extra Cash
Earning extra money doesn’t mean you have to get a second job. Whether you work full-time or part-time, you can start earning passive or secondary income by investing a little time and/or money on side ventures. If executed correctly, you could build yourself a profitable side business that not only increases your monthly mortgage payments, but also develops your personal interests and passions. Turn your hobby into a business, become an Uber driver, or start a blog.
6. Pay a Little Extra Whenever You Can
You get a Christmas bonus and your first thought is to buy that big-ticket item you’ve had your eye on. Your tax return comes in and you feel like going on a well-deserved shopping spree. A lucky scratch ticket wins bigger than you imagined. Receiving little piles of cash doesn’t happen very often, but when it does, we feel an inherent need to treat ourselves. There’s nothing wrong with that, and these windfalls happen so infrequently that to do anything else but spend it on something fun seems almost sacrilegious. However, the sum of your bonus money in a single calendar year could be used more wisely. This is easy money to put toward your mortgage that could amount to thousands of dollars every year.