A volatile economy requires diligence in budgeting and reducing debt, but not many people consider their mortgage when seeking ways to reduce debt owed. Many home owners simply consider their mortgage as a permanent part of their life that will require monthly payments forever.
Experiencing a completely debt free life is something many people want, but which is not always in reach when there’s a huge mortgage payment in the way. Fortunately, there are a number of strategies that exist for paying down a mortgage sooner which might not require anything completely drastic to accomplish.
1. Make more frequent payments with a bi-weekly arrangement
This strategy requires paying a mortgage 26 times a year (every two weeks) instead of paying once a month for 12 payments a year. The value in paying more frequently means hefty savings in interest and may even offer a few years shaved off the length of time spent paying the loan.
2. Put extra money into the mortgage payment
Whenever a family member who pays the mortgage gets a raise, a good way to spend that money is to spend it on the mortgage. Instead of increasing the cost of a family’s lifestyle, paying down the mortgage quicker is often the best option. Other sources of extra money may include yearly money like tax refunds that can be sent right into a mortgage payment. Even a few hundred dollars offered as a gift from grandma can go into the mortgage payment.
3. Make an extra payment each year
With most loans, an extra payment may be made each year that goes directly to the principal balance instead of feeding into the interest. Although it’s best to make this payment as large as possible, even a few hundred dollars on this type of payment would be a great way to pay off the mortgage more quickly. A home owner should strive to make an extra payment on the principal every single year that the mortgage is active.
4. Pay a little more with each check
It might not seem like it would make a large impact, but paying just a little more each month would offer the potential for huge savings in interest charges. The easiest way to figure out how much more to pay each month, is to round up the payment to the nearest even hundred. This means a $670 payment would become a $700 payment. The difference equates to a few movie tickets each month and probably wouldn’t be missed in most cases. Making a minor change like eating out one less time a month could mean bigger mortgage payments.
5. Keep knowledgeable about rates and changes
A home owner should stay well-informed about current rates and any potential changes that might occur within the mortgage industry. Periodically and when circumstances warrant it, doing a search on the best 10 year mortgage rates Canada has to offer may result in savings, but only if a home owner catches the rate at the right time. This means keeping an eye on current rates and any legislative changes that come about and impact mortgages.
Whether a family chooses to engage in all of these options for paying down a mortgage sooner, or whether they choose to employ just a single technique, the value in getting a mortgage paid off more quickly is tremendous for the financial health of the family. Modern family life is expensive and removing the constant requirement of making a mortgage payment offers the opportunity to help the kids with college, save more money for retirement, and make improvements around the house.