Nov. 19, 2014 | Nolan Matthias
Tips to pay off your mortgage fasterFreedom is as easy as one, two, three
To be mortgage-free faster, it is up to borrowers to take the necessary steps to accelerate payments. And it's not as simple as waiting until your lucky six numbers come up in the lotto. Paying off a mortgage sooner is all about strategy and automation.
Here are three ways to cut your mortgage down to size.
One of the most effective ways to pay off a mortgage faster is by increasing payments. In fact, we practise what we preach, having cut our mortgage down from 30 to 14 years by increasing payments by just 15 per cent per year over the last three years.
Increasing payments works because it generally goes unnoticed in the monthly budget. Once the payment increases are set up, they take care of themselves.
Further, it's possible to increase payments by as little as $50 a month, or, depending on the lender, as much as 20 per cent. In some cases, borrowers can even go as far as doubling their payments on an ongoing basis.
Double up payments
Some lenders offer a double-up payment option. The concept is quite simple – just make an extra payment equal to the current payment. Many borrowers love this feature, and it is often the deciding factor when it comes to selecting a lender.
Borrowers who take advantage of the double-up option on every payment will reduce their 25-year mortgage to 10 years. For those who do it every second payment, mortgage freedom day comes just prior to the 15th year. And just twice a year will knock five years off the amortization.
If the concept of doubling a monthly payment seems daunting, consider going weekly. Payments are smaller and, as a result, easier to double up. A weekly payment schedule also accelerates the amortization period.
Special occasion lump-sum payments
Many borrowers know they should make lump-sum payments on their mortgage, but never seem to get around to it. What we suggest is pre-selecting a date or two every year to make an extra payment. Examples include anniversaries, birthdays, children's birthdays, Thanksgiving and Christmas.
The amount of the lump-sum payments doesn't have to be extravagant. Most lenders will allow lump-sum payments as small as $100. The amount doesn't matter. Just do what you can afford and mortgage freedom day will come much sooner.
Nolan Matthias holds a bachelor of arts in Economics, is the co-founder of Mortgage360 and the author of The Mortgaged Millionaire. Call Nolan at 403-615-6132 with your questions or to set up an appointment with an Accredited Mortgage Professional (AMP).