If you’re dreaming of the day you’ll be mortgage free, follow these proven debt-destroying techniques to pay down your mortgage and clear your balance faster.
1. Apply your windfalls. Are you expecting a bonus at work or selling off an asset? Instead of splurging the extra cash you earn, put some of it down on your mortgage. Last year, nearly a million Canadian mortgage holders made an average $10,000 lump sum payment to their balance, wiping out a total of $10 billion in mortgage debt*.
2. Pay more than you have to. Most lenders allow an increase of 10% to 20% above and beyond your regular payments, but contributing even a few extra dollars a month helps chip away at debt. Every extra dollar goes right to your principal, in turn reducing your interest costs. And you’ll hardly miss the money. In a recent Mortgage Landscape Study, two-thirds of the mortgage holders surveyed agreed it’s possible to pay off their mortgage faster without changing their lifestyle. Most respondents (59%) said they believe adding $20 a month to their mortgage payment would have no impact on their finances.
3. Minimize prepayment penalties. Try to hold off on making a large prepayment until your mortgage maturity date. If you have a portable mortgage, you can carry over the same interest rate and terms and conditions to a new mortgage without penalty.
4. Set a timeline on non-mortgage debt. You can free up some funds for paying off your mortgage by tackling any outstanding balance you have on a line of credit or home equity loan. Whether it’s 18 months, two years or more, set a timeline, calculate the monthly cost and stick to your plan.
5. Leave no expense unturned. Try tracking your monthly household spending. No doubt you’ll find expenses like an underused gym membership or a costly phone plan that you can either eliminate completely or cut down.
We can find ways to help you save money on your mortgage or determine whether refinancing makes sense as part of your debt repayment strategy.
* Canadian Association of Accredited Mortgage Professionals