While it may seem like a gargantuan task right now, one day you will be mortgage-free. To help that day come a little sooner, abide by some (or all) of the following steps:
1. Make a payment more than once a month.
While it may take a little bit of getting used to, paying weekly or bi-weekly rather than once a month can save you thousands in accumulated interest costs and shave years off the life of your mortgage.
2. Pay the five-year fixed rate on your variable rate mortgage.
Historically speaking, variable rates have generally remained significantly lower than their five-year fixed counterparts. By employing a bit of discipline and paying the going five-year fixed rate on your variable rate mortgage, you’ll likely be adding a few hundred dollars to your payment every month — and that’s going directly to your principle.
3. Stay away from 35-year amortizations.
While they’re good to have as a back-up option — a safety net to use if you lose your job, start a new business or go on maternity leave — sticking with the 35-year amortization rate throughout the life of your mortgage means, well, you won’t be mortgage free for another 35 years. When shopping for a home, make sure you can comfortably afford the 25-year amortization rate, and aim to use the 35-year rate as your emergency option.
4. Take advantage of lump sum payments.
While very few Canadians ever make a lump sum payment on their mortgage, in most cases the option is available. If you receive performance bonuses with your current job, or if you’re a commission-based employee that’s raked in a little more than expected in the past year, consider placing the surplus towards your mortgage.
*5. Shop around at renewal.*
From term to term, mortgage rates will change. Make sure you’re shopping around for the best rate possible, rather than merely re-signing with your existing lender.