Paying off Mortgage: 6+ Ways to Pay Down Your Mortgage Sooner 🏠

If you are searching for Ways to Pay Down Your Mortgage Sooner and how to pay off your mortgage faster then you’ve come to the right place. In this post, we will tell you the most brilliant way to pay off your mortgage faster like how to pay off your mortgage in 5-7 years or how to pay off your mortgage faster. To know all these kinds of precious information read this post completely in order to get full and complete knowledge because you also know half and incomplete knowledge is very harmful.

Seven Simple Ways to Pay Down Your Mortgage Sooner – how to pay off mortgage faster

This is the moment you’ve all been waiting for. Below you’ll find simple ways

to burn your mortgage. To make things easier, we’ll use the same fictional

mortgage in each example discussed below. So, imagine you’re buying a condo

for $375,000 with a 20% down payment ($75,000), leaving you with a $300,000

mortgage. Like most Canadians, you go with the safety of a five-year fixed-rate

mortgage at 2.99%. Instead of monthly, you choose to pay your mortgage

accelerated biweekly.

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Accelerating Your Mortgage Payments

There’s a common misconception about payment frequency. Many people think

that how often they make a mortgage payment plays a larger role in interest

savings than it actually does (in fact, it plays a small role.) It’s the accelerated

alternatives that save you big bucks. When you pay weekly (52 payments per

year) or biweekly (26 payments per year) instead of monthly (12 payments per

year), the interest savings are minimal; in these scenarios, it’s more about

finding the payment frequency that best matches your cash flow. With

accelerated weekly (52 payments per year) and biweekly (26 payments per

year), you’re paying the equivalent of an extra month’s payment every year

(more on this below).

At first glance, you’re probably wondering how you’re saving any interest

with accelerated weekly or biweekly. After all, you’re still making the same

number of payments as non-accelerated weekly and biweekly. While that may be

true, you’re actually paying a slightly higher amount on each mortgage payment.

To understand this, it helps to look at the difference in the way biweekly and

accelerated biweekly are calculated.

If your monthly mortgage payment is $1,418 and you pay biweekly, your

biweekly payment is $654 ($1,418 × 12 months/26 weeks = $654). But when you

pay accelerated biweekly, your biweekly payment is slightly higher, at $709

($1,418 × 12 months/24 weeks = $709). As mentioned, with accelerated weekly

and biweekly, you’re paying the equivalent of 13 monthly mortgage payments

instead of only 12.

Paying accelerated on a biweekly schedule that matches your payday is the

most painless way to budget for the higher payment. You won’t even realize

you’re making higher annual payments (it’s probably a good thing, as you might

not choose this option if you did).

EXAMPLE ACCELERATE YOUR MORTGAGE PAYMENTS AND SAVE BIG BUCKS

Accelerating your mortgage payments can make a big difference compared with

regular (i.e., non-accelerated) payment frequency. As the chart below shows, by paying your mortgage accelerated biweekly instead of monthly, you can save

over $15,000 in interest and pay off your mortgage almost three years sooner.

Make Lump-Sum Payments – how to pay off mortgage faster

Make lump-sum payments whenever you can afford to (most lenders let you do

this on one of your regular payment dates during each year of the mortgage

term) by tossing “found” money—tax refunds, bonuses, cash gifts—at your

mortgage. Look for new ways to save money: brown bag your lunch, switch to a

less expensive cell phone plan, or carpool and put the money you save toward a

lump-sum payment on your mortgage. Lump-sum payments go straight toward

principal, saving thousands of dollars in interest and shaving years off your

mortgage amortization. For example, if you take your $2,000 bonus at work and

make a lump-sum payment each year with it, you’ll save $17,774 in interest and

pay off your mortgage in only 19 years—6 years sooner.

Shorten the Amortization Period

By shortening your amortization period—the length of time it takes to fully

repay the mortgage—your mortgage payment will be higher, but you can save a

ton in interest. Try shortening your amortization period from 25 years to 20

years. In the same example, by paying your mortgage in 20 years instead of 25

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Don’t Get Dinged with NSF Charges – how to pay off mortgage faster

Keep track of money coming out of

your chequing account for mortgage

prepayments. Consider making

purchases on your credit card instead

of your debit card so you don’t have

to worry about your bank account

balance before each purchase (that

being said, be careful not to carry a

balance on your credit card, as the

interest is costly).

years, not only will you pay off your mortgage 5 years sooner, you’ll save

$22,891 in interest.

That being said, to give yourself more flexibility, you might consider going

with a longer amortization period and taking full advantage of your prepayment

privileges. That way, if you lose your job, say you won’t be stuck paying the

higher mortgage payment. At the time of writing, the maximum amortization for

a high-ratio mortgage is 25 years, and 30 years for a conventional mortgage.

Round Up Your Mortgage Payments – how to pay off mortgage faster

Round up your mortgage payments to the closest

$25 payment increment, so you’re paying a few

extra dollars a month toward your mortgage. By

rounding $709 paid accelerated biweekly up to

$725—$16 more (about the price of a couple of

beers at happy hour)—you’ll save $3,697 in

interest and pay off your mortgage in just less

then 22 years—3 years sooner. Get in the good

the habit of increasing your mortgage payment

whenever you get a raise at work or land a

lucrative long-term contract.

Pay Your Mortgage as If Rates Are Higher- how to pay off mortgage faster

By increasing your mortgage payment as if rates are 2% or 3% higher than they

are, not only will you pay your mortgage off sooner, you’ll be prepared if

mortgage rates are higher when your mortgage comes up for renewal. If you

pay your mortgage as if rates are 4.99% (i.e., 2% higher), your biweekly

accelerated payments will increase from $709 to $872. Although your payments

would be $163 more, you’d save $28,719 in interest and pay off your mortgage

in less than 17 years.

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Read More for more information: How To Beat The Lenders At Their own Game

Contributing to an RRSP Paying Down Your Mortgage

There’s a never-ending debate about

whether it’s better to pay down your

mortgage or contribute to an RRSP.

Keep things simple. Contributing to

an RRSP doesn’t make sense for

everyone (e.g., if you expect your tax

rate to be higher in retirement than it

is now), but for those for whom it

does contribute to it, and use the tax

refund as a lump-sum payment on

your mortgage.

Read More for more information: Money Saving Tips: 24+ Ways To Save Money From Salary

Consider Refinancing Your Mortgage

If mortgage rates are a lot lower today than they were when you signed up for

your mortgage, it may be worth refinancing it. When you refinance your

mortgage, you’re breaking your existing mortgage to sign up for a new mortgage

at a lower rate. This often comes with penalties and fees (see Standard vs.

Collateral Charge, p. 136). To come out ahead, your savings from refinancing

have to outweigh the penalties. Before you break your mortgage,

get your mortgage broker to crunch the numbers, or use an online mortgage-

penalty calculator to make sure it makes sense to do so (your mortgage penalty

could end up being higher than you think). To reduce the mortgage penalty,

prepay as much of the mortgage as you can before breaking it. To save even

more interest, when you refinance, keep paying the same mortgage payment you

were paying at the previous higher rate. As for fees, ask your new lender to see if

they’ll cover them.

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Read More for more information: Reverse Mortgage: Chase, Rocket Mortgage & Troubles

Set a Mortgage-Free Date and Celebrate Your Accomplishment

I wouldn’t have paid off my mortgage in three

years by age 30 if I hadn’t set a mortgage-free

date. It all comes down to goal setting. I’m a sci-

fi nerd, so I wanted to pay off my mortgage

before Star Wars: The Force Awakens hit

theatres. I’m not ashamed to admit I had a Star

Wars countdown clock on Facebook—every

In the morning I’d wake up to see how many days were

left until the movie’s release. This helped

motivate me to keep going.

Circle the date of your mortgage-burning

party on the calendar (and complete the worksheet below), and do what it takes

to pay off your mortgage early (heck, send out invitations early if that’s going to motivate you!). Imagine how amazing it will be to celebrate burning your

mortgage with all your family and friends cheering you on.

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Read More for more information: Mortgage Burning: 5 Key Mortgage-Burning Takeaways

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