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four ways to pay off your mortgage faster

By on May 28, 2013
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You want to own a home, not a mortgage. But it’s a long road, with 25 years or more of monthly mortgage payments for most of us.

by Editor, Natalie Hughes

What if you could pay off your home in less time? Imagine . . . the freedom of travel, owning a vacation home, or just having extra money.

Although in the past banks talked very little about how mortgages were structured, with front-loaded interest and very little principal paid off within the first five years, in recent years they been much more forthcoming. Perhaps this is due to a savvier consumer and the wealth of information available with the touch of the Google search button. Let’s not question why… let’s just be grateful that the tools are at your disposal to make freedom from your monthly payments that much more within your reach!

Lenders (such as the Scotiabank example below — kudos to them) are finally recognizing the need to work with consumers. They offer a mortgage pay-off calculating tool which lists the following four keys to paying off your mortgage faster:

1. Change your payment frequency from monthly to bi-weekly or weekly. You’ll easily settle into this payment frequency and not even notice the extra month of payments out of your pocket that will be applied to your principal each year.

2. Increase your mortgage payments a little bit every year.  As the years pass, often our income grows. Increasing your mortgage payment amount each year by just a few hundred dollars a month can make a great dent in your principal. Take that 3% raise your boss gives out and apply it directly to your mortgage. It will feel painless while in the end making great gains to your financial future.

3. Make an annual lump sum payment.  This may seem impossible . . . but life delivers unexpected windfalls now and again. While your first instinct may be to spend extra money on that extravagant vacation or a luxury purchase, a lump sum payment that goes directly to your principal will get you many vacations after the mortgage is paid off. Your mortgage agreement will have a penalty free amount that you are allowed to pay each year, and if you are able to take advantage of even some of that amount, you’ll be taking months or even years off your payments.

4. Round up your mortgage payments to an even number. Rounding up is a very little thing that makes a difference over time. If your mortgage is $260/week and you rounded up to $300 you would be paying an additional $2080 per year.

If you want to see the difference on one or all of these methods can make to your future financial freedom, a great example of the many calculators now at your fingertips is an online tool at www.scotiabank.com that calculates the savings for you – a great way to get informed about your choices. It’s interesting — and refreshing — that the bank will make less money from you if you follow their direction, and yet they offer it up freely. Take advantage of these steps, no matter which lender with which you have your mortgage . . . it works the same no matter the financial institution.

Can you taste freedom yet?

 

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