Sometimes it can feel like you’ll be paying your mortgage for ages. It doesn’t have to be that way, though. There are several strategies that can help you pay your mortgage off faster.
Check out these 6 tips to start fast-forwarding to a place where you can use that extra cash for something else and feel like your home is well and truly yours.
1. Speed up payments
Instead of monthly payments, start making payments biweekly. This way, you’ll make 26 payments a year instead of 12 – that’s like getting an extra payment. Plus, it reduces the interest you owe over time. This can take years off your mortgage.
Want to check the math? See how much you could save by switching to biweekly payments with our mortgage payment calculator.
2. Increase payments
If you can afford to put more money toward your mortgage, do it. Talk to your mortgage provider about increasing your mortgage payment on an annual basis.
At Meridian, for example, you can pay off up to 20% more of your mortgage each year through a combination of prepaying more of your original principal balance and increasing your original mortgage payment.
3. Make lump-sum payments
If you can, make a lump-sum payment (also known as a pre-payment) toward your mortgage each year. You could use the money you get from your tax refund or annual bonus, for example. This brings down your principal amount and will decrease the interest you’re paying.
4. Weigh your options
As you near the end of your mortgage term you have the option to renew your mortgage with the same lender, pay off your mortgage in full, or switch to a different lender. This is a good time to review your mortgage needs. Do you want to negotiate for a better interest rate? Change from a variable rate to a fixed rate? Switch to a lender with better prepayment options?
If your goal is to pay your mortgage off faster, you want to make sure you’re with a lender offering good prepayment options, bi-weekly payment schedules, a low rate, etc. It’s also helpful to talk through all your options with a mortgage advisor.
5. Create a budget
Creating a budget is the best way to figure out how much extra money you could afford to put toward your mortgage. Budgets track the money you have coming in, how much you spend and on what, and where you could cut back.
Not sure where to start? Try our budget calculator.
6. Stay motivated
No matter how long it takes to pay off your mortgage, remember to celebrate the milestones along the way. Looking back on how far you’ve come is a good way to stay motivated for the road ahead. Here are just a few ideas of how to do this:
- Hang up a drawing of your home and slowly colour it in as you get closer to paying it off.
- Mark the anniversary of your move-in date with a budget-friendly celebration, like a new houseplant, or potluck dinner with friends.
- Review your budget every few months, and leave some room to save up for something that makes you happy, like a vacation.