It’s no doubt that everyone dreams of buying or building a house. That is why many people end up taking out mortgages to fulfill their dreams. However, paying off the loans can be quite overwhelming, necessitating the need for tips to pay them off quickly.
As reported by The Globe and Mail, the outstanding mortgage debts owed collectively by all Canadians amount to CA$1.49 trillion. That’s equivalent to 65 percent of the household debts in Canada. In other words, mortgages contribute the largest to household debts.
How to Pay Off Mortgage Faster
If you are looking for ways to pay off a mortgage faster, you’ve come to the right place. In this article, we explore the most useful tips for paying mortgages. If you plan to pay off mortgages on any of the York region homes, Ballymore Homes can also be of great help.
Here are the tips on how to pay off your mortgage faster in Canada. These useful tips will help you track and pay off your mortgages quickly.
1. Increase Your Mortgage Repayment
One of the best ways to pay off your mortgage quickly is by increasing your repayments, especially if your income increases over time. Increasing your principal payments will help you reduce the loan term of your mortgage. That will finally reduce your loan interests.
However, before increasing mortgage repayments, you should first consult your mortgage company. Why check with your company first? Some companies don’t accept additional payments at certain times. Some may even apply penalties for early repayments.
Generally, standard mortgages have repayment terms of 30 years to pay off the principal and loan interests. If your mortgage is variable, the repayment amount will increase and decrease intermittently, depending on the variation of the interest rates.
2. Make Biweekly Mortgage Payments
With this payment plan, you will make half of your monthly mortgage payments every two weeks. So, you will have 26 biweekly periods in a year that is equivalent to 13 months. The extra month can significantly reduce your loan term from 30 years to around 25 years.
The number of years that the biweekly mortgage payment will knock out depends on the mortgage’s interest rates. However, this strategy requires self-discipline, and it works best for homeowners who can pay more than what they ought to repay at a specific period.
3. Prepare a Budget for Your Mortgage Payment
The key to paying off your mortgage faster is budgeting. It can help you evaluate your monthly payments to pay off your entire loan. You can also use the budget to determine the extra amount of money you should add to pay off your loan early.
As you prepare your loan repayment budget, make sure that it is comprehensive, realistic, and achievable. While preparing a budget can be easy, sticking to it is usually a problem for many people. So, ensure that you stick to your budget for the whole payment period.
Thankfully, many online resources and tools will help you create a budget and stick to it. You can also seek help from an experienced financial advisor who will help you manage your finances.
4. Cut Back Unnecessary Expenses
The best way to get your finances in order is by reducing your daily expenses. You can cut back the costs that you can survive without or opt for cheaper alternatives. By doing so, you will save some money that you can channel into your mortgage payment.
For instance, you can sacrifice eating an expensive lunch in expensive restaurants during workdays. Carrying your lunch from home can help you save up to $100 each month, and channelling the savings to your mortgage can lower your loan interest payments.
Other costs that you can cut back include coffee and bottled water expenses. You should carry drinking water from home every day instead of buying bottled water. Eliminating all the unnecessary costs can help you save up to $30,000 in home loan interests.
5. Refinance Your Mortgage
Mortgage refinancing can reduce your loan term from 30 years to 15 years, helping you pay off your mortgage faster. Consequently, that will reduce the interest on your home loan. Mortgage refinancing will help you save a significant amount of money.
When refinancing your home loan, you will have to increase your monthly payments to reduce your loan term. Opting for a 15-year mortgage with fixed rates can be a great idea. Ensure that you negotiate for better and favourable rates that will not ‘hurt’ your finances.
6. Move into a Smaller House
Downsizing your home is the fastest way to eliminate your mortgage debts, but one of the most challenging decisions to make. It involves selling your big home and buying a small and manageable one. Use part of the money to pay off your mortgage.
When purchasing a smaller and less expensive house, you won’t have to take out another mortgage. Instead, you will use the profits to buy a new home. If the gain is not sufficient to pay for a new house, you can still opt for a small mortgage that you can pay off quickly.
7. Purchase an Affordable House
Before buying a house, evaluate your financial situation to make sure that you can afford the home you intend to purchase. It will help you take out a mortgage that you can pay off comfortably. A real estate agent can help you know your financial situation.
Paying off your mortgage faster is one of the most reliable ways to gain financial freedom. While the tips mentioned above can help you pay off your home loan, consulting a professional financial advisor is also of crucial relevance. Such people can also help you understand how to pay off a mortgage faster.