Your Road to Mortgage Freedom
Do you dream about paying off your mortgage? The new year is usually a time when people review their finances and, if they are in debt, create a plan to reduce that debt. With interest rates rising in Canada, the perennial question resurfaces: Should you pay off your mortgage early? Or invest your money instead? Paying off your mortgage may be the best investment you can make.
Here are some ways to save some serious money and become mortgage-free faster. It only takes a few small steps and may save you thousands of dollars in the process.
Accelerate your payment frequency
This is a popular strategy. If you’re making monthly payments on a $300,000 mortgage with a 3% interest rate, amortized over 25 years, it will cost you approx. $125,920.44 in interest. By increasing your payment frequency to accelerated bi-weekly payments, you will shave nearly three years off of your amortization schedule, and save approx. $16,058.57 in interest.
Round up your mortgage payment
This is pretty painless. Every dollar counts when it comes to paying off your mortgage. If your accelerated bi-weekly mortgage payments are $543, consider rounding up to $600 instead. The extra $57 can save you thousands of dollars in interest over the term of your mortgage and you might not even notice the difference in your monthly budget.
Refinance to a shorter-term amortization
You may be able to refinance into a mortgage for 10, 15 or 20 years. Your payments will be higher on a 15-year amortization, but perhaps not as high as you think.
Make lump sum payments
Adding just $1,000 extra to your mortgage per year will allow you to pay it off sooner and, combined with accelerated bi-weekly payments, can chip off a substantial amount of the interest as well.
A lower interest rate
It doesn't hurt to work together to see it we can negotiate a better rate. The difference between a 3.49 % and a 4.29 % rate can add up to significant savings in interest over the term of the mortgage.
It’s easy to forget about your mortgage when you’re making automatic payments. It’s a good idea to keep up-to-date on mortgage options and interest rates, which could potentially save you thousands of dollars.
The freedom of being completely debt-free is a dream for many Canadians. If you’re unsure of what your next step should be, call me. Together we can review your mortgage, look at your financial picture and devise a mortgage-reduction plan that works for you.
It's me again! I will be posting articles with more in depth information regarding specific mortgage scenarios. I do my best writing when my kids are asleep...