Do you want to potentially save $1,000s over the course of your mortgage in interest and minimize the amount of time you’re chained to growing real estate debt? When you pay off your mortgage faster, you accomplish one of life’s biggest debts and allow yourself the chance to chase a new adventure. Re-invest those financial resources into something else and get there with these tips on how to pay off your mortgage faster:
1. Purchase a property you can afford
So many homeowners buy properties a little bit above the price range where they should be looking. Before you get involved with a mortgage that it’s possible you can’t afford, strongly consider worst case scenario what you can afford under your current financial circumstances. If you set yourself up unknowingly to be at a disadvantage down the road, it could happen. The fastest way to pay off your mortgage? Be smart with the mortgage you agree to.
2. Refinance for a shorter term
If you want to learn how to pay off your mortgage faster, refinancing is certainly a plausible option. Refinancing your mortgage so that you go through it faster seems like an obvious choice but there’s more benefit than you may imagine. Of course you will be cutting your time in half. You will also be eliminating interest you’d otherwise be paying long-term.
Banks will also generally provide you with a better interest rate on a shorter term loan compared to a longer term mortgage. If you have a mortgage calculator to work with, play around with the numbers and do some calculating. If you can afford the higher monthly payment, set it up!
3. Are you getting a tax refund?
A lot of us end up paying more than we are required in taxes every year and with that, we are provided a return come tax time. If you are fortunate enough to receive a refund, take that money and make a lump sum payment towards your mortgage financing. This is one of the best ways on how to pay off mortgage faster.
It might not seem like a lot and it may feel like a waste of that refund but remember, it is important to think long-term. There are thousands of people who will cut down on a lot of their mortgage debt this year with lump sum payments like these.
4. Sell assets for a windfall payment
To make progress on your mortgage, look around at your assets for what you can sell. Consider a garage sale or putting high-value items on classifieds ads. This cash can amount to a lot, if you have instruments, furniture, clothing, a vehicle, or other assets to get rid of. A lump sum payment like this is extremely advantageous because it can immediately drop what’s owing on your principal. It doesn’t hurt to take stock at least once a year for items you can sell.
5. Add a little bit extra every month
On top of your committed mortgage payment, give a little more. Set aside an amount every month to add to your mortgage. It might only be $15 or $20 but it counts. If you’re on a bi-weekly payment plan and add an additional $25, after five years you’ve reduced your principal down by 2.5 percent. On a $450,000 mortgage, you’ve just saved yourself over $7,000 simply by putting on a little extra.
6. Commit to paying double
Let’s say you’re able to budget for more than “a little”. If you want to pay off your mortgage faster, commit to making a double payment every other month or 4 times a year. Set a schedule for these double payments. In time, you will shave off $1,000s and significantly lower your amortization by months or potentially years. Just think about how you will feel on this off-months when you don’t need to make a double payment!
7. Taking out your investments
If you have stock, financial investments, bonds, GICs, or any other investments you can pull to pay off more of your mortgage than what your income allows, this may be a strategy worth pursuing. In a sense, you’re trading one low risk investment in favor for another. Your risk does not change and the return from real estate can exceed what you could earn in a return from these investments. If you’re fortunate to have these pockets of financial resources, pull from them.
8. Apply a work raise to your mortgage
Have you been given a bonus at your work or is there an annual raise coming your way? Instead of splurging it on a new smartphone or self-care, commit to taking that extra off your paycheck and putting it towards your debt. If you’re already8 getting by on what you have, you won’t miss the extra.
9. Be frugal
The people who you read stories about who pay off their mortgage faster than anyone do so by cutting expenses. Eliminate impulsive buys, luxuries, and invest your spending in things that provide the highest value or most happiness. Above your committed monthly expenses, anything else should go towards paying down that mortgages. Who knows, there’s nothing saying you can’t be someone who pays down their mortgage in a single-digit year time frame.