For the average Canadian, getting a mortgage on a single-family home is a big, big deal. It’s essentially the single largest debt you will ever have to pay off in your life. A typical mortgage will last up to 30 years, 60 years (if you stretch it out), or even 80 years! The good news is, there are ways to pay off your mortgage sooner. Let’s look at some of the ways to do it.
1. Pay More Than the Minimum on your Mortgage
When you get a mortgage on a residential property, you will be required to make monthly payments on it. The amount of these payments is commonly called the “mortgage payment.” If you pay more than the minimum amount of your mortgage payment, then you will be increasing the amount of money you pay against your mortgage on a monthly basis. And as a result, you will be getting rid of the mortgage faster.
The minimum mortgage payment is typically calculated as a percentage of your outstanding mortgage amount. For example, let’s say you have a mortgage of $300,000 and you have 20 years to pay it off. If the minimum payment is 2.5%, then the minimum payment that you will be required to pay per month is $850. But let’s say you decide to make your monthly payments equal to 3%. In this case, your monthly payment will be $1,050. This means that you will end up paying an extra $200 each month. This is money that will be added to the outstanding mortgage, and therefore, your mortgage will be paid off faster.
2. Make your Extra Payments to Pay Off the Principal of the Loan
When you remit payment to your lender, the bank will be able to tell if you are overpaying on your mortgage based on the interest rate. For example, if you make a $1,000 payment, but the bank only charges you $550 in interest, it is going to look at your payment history and see you’ve overpaid by $450. It will then redirect those payments to your principal. If you are already paying more than the minimum amount required to pay the interest, then you can make extra payments that will only be applied to the principal balance.
This will shorten the life of your mortgage, and you will be able to pay it off sooner than later.
3. Consolidate Multiple Mortgages
If you have multiple mortgages, then you may be able to consolidate them into one new mortgage. This will be beneficial because you will only be required to make one mortgage payment every month. Even better, the lower rate on your new mortgage will make your monthly payment lower, and you will be able to save money. This will free up cash flow, and paying down your mortgage will be made more attainable.
4. Utilize Your Tax Refund
A lot of Canadians wait for the tax refund at the end of the year and then use it to pay down debt. If you have a mortgage, then you can apply your tax refund to your mortgage as well. This will reduce the amount of time it takes to pay off your mortgage. Plus, you will have money to use for your other debt payments.
5. Keep Your Payments the Same When Refinancing Your Mortgage
When renewing your mortgage, you will likely be able to get a better rate on it. If you are able to get a lower interest rate, then you will want to move your mortgage to take advantage of it. However, you want to make sure that you do not get a longer-term in order to keep your payment the same. If your mortgage is shorter, then you will be able to pay off your mortgage and get rid of it sooner.
The sooner you can pay off your mortgage, the sooner you can start saving for other things. There are many ways to pay off your mortgage, so if you haven’t started yet, then think about using one of the above methods.
If you’re looking to apply for a mortgage, you need to find an agent that you can trust throughout the process. Ottawa Mortgage Services is the perfect partner to help you get that mortgage that suits your needs and your budget. Our team actively deals with lenders and negotiates all aspects of mortgage underwriting to make sure you get exactly what you need for your loan. Apply now and get a free assessment from a professional mortgage agent.