Owning a home is a dream most people have, but it comes with a lot of financial responsibility. Taking on massive amounts of debt can prevent things like early retirement, sending the kids to post-secondary school, or taking those much needed dream vacations.
Which is why most experts will tell you if you’re able to tackle that mortgage debt – do it as soon as possible. It may sound like a lot of work now but by following these expert tips you’ll be able to pay your mortgage off faster leaving you room financially to enjoy life.
Make Annual Lump Sum Mortgage Payments
Let’s say you come into a windfall of cash, like an inheritance, tax refund, or maybe a bonus at work, you’re able to put a one-time lump sum payment towards your mortgage. But there’s a few things you should know first:
- Your lump sum payment can only be done once a year;
- You can only pay a certain percentage of your original principle amount borrowed without penalty based on your mortgage agreement; and
- Payments can be made before the end of your term, at the end of your term, or at certain times during your term.
For example, if your mortgage agreement states that you can pay up to 20% of your borrowed amount and your original mortgage principal was $250,000, then you can make a lump sum payment of up to $50,000 every year.
Accelerate Your Mortgage Payment Schedule
Looking to save on interest charges? Increasing your mortgage payment frequency will help. Choosing to accelerate to weekly or bi-weekly payment options, essentially is like making one additional monthly payment each year.
You also have the flexibility to choose the day of the week or date of the month your payments are due, so you can match up your payments to your payday – a great budgeting feature.
Increase Your Monthly Mortgage Payments
Increasing your monthly payments can shorten the length of time it takes to pay off your mortgage. The shorter that amortization period, the less you pay in interest. Increasing your regular monthly payments, even a small amount can go a long way towards paying that principal balance off faster.
Once within a 12-month period you’re able to increase your mortgage payments, as long as it’s not over a specific percentage of the original principal balance. You can continue these payments for the remainder of the term unless you wish to increase them again after 12 months. Talk to your Advisor to find out how much you can increase your payments based on your mortgage agreement.
We’re all about giving you options and advice that is right for you. One of our expert Advisors can walk you through how you can take advantage of the flexible payment options and help you find ways to achieve your financial goals sooner.
