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Mortgage Tips: Three Ways to Pay Down Your Mortgage More Quickly

Mortgage Tips: Three Ways to Pay Down Your Mortgage More Quickly

Couple on beach after paying off their mortgageWhat would you do if you didn’t have to pay your mortgage every month? Would you start putting more money aside for retirement? Would you finally splurge for that kitchen or bathroom upgrade you’ve been putting off? Perhaps more travel would be in your future?

Although it seems like a dream, it is possible to create a plan that will actually allow you to pay down your mortgage faster (and it doesn’t involve winning the lottery – although that certainly wouldn’t hurt!). Here are three strategies to help pay down your mortgage more quickly.

Strategy One: Putting More Money Towards Your Mortgage  

Depending on your mortgage and your lender, you may be able to put more money towards your mortgage above and beyond your regular monthly payments. Typically referred to as a prepayment, this directly helps you pay down your mortgage more quickly and save money in interest.

There are two ways to pay more towards your mortgage. Firstly, you could opt to pay a lump sum towards the outstanding balance of your mortgage. This can be done before the end of your mortgage term, at the end of the mortgage term, at certain dates in your mortgage contract, or at certain times during your mortgage contract.

Lump sum payments work if you are able to find extra money throughout the year to put towards the amount you owe (a work bonus, for example). For some, however, it might be more feasible to increase your monthly mortgage payments and spread out this extra amount over time.

Whether you make a lump sum payment or increase your mortgage payments, putting more money towards your mortgage pays off in the long run. It’s important to keep in mind, however, that not all mortgages are the same. Before you make a lump sum payment, double check your contract to see when you can make these payments and how much you are allowed to pay as a lump sum as your lender may have a prepayment penalty in place if you pay at the wrong time or pay too much.

Strategy Two: Renew Your Mortgage but Keep Monthly Payments the Same

If increasing your monthly mortgage payment or making lump sum payments just simply isn’t in the cards, there is another option. Instead of upping your monthly mortgage payment, you may be able to keep your mortgage payment the same but refinance or renew your mortgage at a lower interest rate. By doing so, more of your payments will be going towards the principal of your mortgage loan, rather than the interest, which means you’ll be able to pay your mortgage down more quickly. Plus, let’s face it, paying less of your hard-earned money on interest is always a good thing.

Strategy Three: Make Weekly or Bi-Weekly Payments

Finally, if you don’t want to change the amount of your regular payments, make lump sum payments or renew your mortgage, there is still a way to pay down your mortgage faster. Instead of changing the amount of your payment or the amount of interest you pay, you can also change your payment frequency. Switching to a weekly or bi-weekly payment schedule will not change the amount of your mortgage payment drastically, but will mean you make an extra mortgage payment or two every year, which, again, will help you to save money in interest and pay down your mortgage faster. It’s important to note that the options for accelerated payments will vary depending on your mortgage agreement; be sure you check with your lender to see what is possible.

Still not sure which option makes the most sense for you? This mortgage calculator can help you get a better sense of the numbers and your options. As a mortgage broker with many years of experience helping clients find the right mortgage solution, I can also help you figure out which strategy makes sense. Contact me today at (705) 315-0516 to see how I can help with your mortgage needs.

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