5 Ways to Pay Down Your Mortgage Faster

Did you know that you can take up to 30 years to pay off a mortgage in Canada?

It can be quite the experience being approved for a mortgage, especially if it is your first. However, once your mortgage payments kick in, the reality of their financial implications dawns.

Mortgage payments can exert a heavy burden on your expenses. Besides paying a mortgage, you have other equally important things to do with your money. Life goes on even after the mortgage. However, the thought of paying for a house month after month, year after year, for thirty years, is close to living a never-ending nightmare.

But there’s good news for you. You can actually complete paying off your 30-year mortgage (assuming a $222,000 home at 4% interest) within 11 years if you follow the following advice:

1. Make an Extra Payment Every Three Months

Anytime you get a windfall or an unexpected bonus, put a good part of it towards your mortgage principal. Any extra, however small, payment you add to your monthly payments goes towards reducing your principal amount. At the end of the day, you will end paying your mortgage in a shorter time period and save in interest.

2. Cut Down on Your Non-Essential Daily Expenditure

Having lunch is a necessity that you can’t do without. But who said you must buy lunch every day? What about bringing your own lunch from home? Let’s assume that you normally spend $100 a month on lunch. If you put this towards your mortgage payment, you will end up saving yourself more than $25,000 in interest! Add to this whatever you spend on Starbucks every month and you will see your interest crumbling faster than cookies. There are so many non-essential expenditures you can scrape or skim off to put your mortgage payments on the fast track.

3. Consider Refinancing Your Mortgage

No one wants to be tied down to a mortgage for 30 years! If the above stringent measures are not your cup of coffee, you might want to consider refinancing your mortgage for a shorter term, say 15 years instead of 30. Refinancing your home allows you to get financing to pay off the initial loan and instead sign up for another one with a lower interest, which is payable within a shorter time.

4. Put Down a Higher Down payment

The best way to buy a home is putting up a 100% down payment at 0% interest. The next best way to purchase a home is to put down as much down payment as you can afford. The more you pay upfront, the quicker you are likely to complete paying the remainder. You will also pay less interest if you follow this route. The mortgage company might require you to pay a 15% or even 20% down payment, but, hey, why not pay 35% instead, or even 40%?

5. Increase Your Regular Income

This may sound like a no-brainer but increased income means you have more funds at your disposal to channel towards your mortgage payments. If you had only one income stream when you took up a mortgage, try to find a second stream or even a third. The more the merrier!

Besides the off-chance of winning the lottery, repaying a mortgage takes time. It also takes a toll on people, especially if they opt for the entire 30-year term. Rather than spend half your productive life paying for a house that you only get to spend time in just a few hours a day, you can apply the above tips to pay it faster. This will, however, entail making great sacrifices such as trimming your spending and putting the savings therefrom towards your mortgage payment. If you follow the above advice to a T, you are likely to pay that 30-year $220,000 mortgage in under 15 years, or less.