Many financial planners will agree that one of the best financial strategies available is to pay off your mortgage as quickly as possible and eliminate years of paying unnecessary interest. Here are a few strategies to help you cut years off your mortgage:
Shop around
When your mortgage comes up for renewal, you aren’t limited to using the same lender. Take a look at what other financial institutions or mortgage brokers have to offer.
Consider all your options
When evaluating mortgages, remember there are other factors that can have an impact on cost in addition to the interest rate. The opportunity to make supplementary payments against the principal has significant value. Penalties for early termination can also have an impact on how quickly you can retrieve your mortgage debt.
Make sure your mortgage is portable
If you get transferred or decide to change neighborhoods, most banks allow you to move your mortgage to a new property without penalty.
Make payments as frequently as possible
Most lenders will allow you to change the frequency of your payments during the term of an existing mortgage. Speak to your lender and choose the most frequent schedule of payments available to you. Choosing weekly payments versus monthly can literally save you thousands of dollars and help you pay off your mortgage years earlier.
Generate additional income from your property
Renting out a portion of your property to earn income is a time-honoured practice that still holds true today. Sacrificing some living space in the early years of your mortgage can speed up your payment schedule. Lump sum payments applied directly to your principal early in your mortgage term will make a major impact on paying off your home quickly and achieving financial independence.
Fixed vs. Variable Rate Mortgages
A fixed rate mortgage has a fixed payment schedule, interest rate and amortization period.
A variable mortgage means that the interest rate may go up or down, as it will change with the prime lending rate.
The amortization period of a mortgage is defined as the length of time over which you will repay your entire mortgage. – Current Mortgage Rates in BC