Here are some simple ways to pay down extra principal early on. This will shorten the life of your mortgage and reduce the amount of interest you'll pay over the years.
1. Round your payments up – this little extra adds up over time.
2. Pay a lump sum whenever possible. Use your tax refund, your annual bonus, or if you're lucky enough to get one, an unexpected cash gift, and put the money against your mortgage. Most lenders allow you to pay up to 15% - 20% of your mortgage amount each calendar year.
3. Increase payments when you get a raise. Most lenders will allow you to increase your payments, and again, you are typically entitled to increase them by 15 - 20% per year. Take advantage of their flexibility!
4. Make bi-weekly payments – you'll end up paying more toward the principal each year. If you start doing this from the beginning, you can pay your mortgage off years sooner. Not only that, but if you are paid bi-weekly, it makes your life simpler too!
5. Keep payments the same when mortgage rates have fallen. This is applicable both in a variable rate scenario and when your mortgage is up for renewal and the interest rate has dropped. Keeping your mortgage payments the same as before can save you thousands of dollars in interest.
For inspiration, check out this article on Moneyville.ca - in which the author describes how he and his wife paid off their mortgage in three years. Aggressive? Definitely. But, it does show that if you're disciplined and motivated, you can pay off your mortgage earlier than you think.
If you would like help with your specific mortgage question, don't hesitate to call or email me!
~ Powered by Mortgage Intelligence
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