A mortgage is a huge burden on many people, whether it’s for residential property. Paying off your mortgage before retirement isn’t just about getting out from under the debt—it’s about achieving real freedom. The sooner you pay off your mortgage, the more money you save each year (and over time) by avoiding interest charges and building equity faster, along with the most important point — owning your property entirely without owning anything to the bank. Can you achieve that sooner than your given amortization period? If so, then how? In this article, I will provide you with a few vital tips to pay off your mortgage faster as a professional mortgage broker with over 15 years of professional experience.
How Much Can I Pay Off My Mortgage Without Penalty?
This question may be the first that comes to mind when discussing paying off a mortgage early. The most straightforward answer is that you need to check with your lender to see how much more you can pay towards your mortgage without receiving a penalty. You may be restrained by timeline (i.e. will be penalized if you pay extra in the first 3 years of your mortgage) instead of the amount. If you’re all set and able to pay off a mortgage early without harsh consequences, let’s take a look at a few ways how.
1. Allocate a Larger Down Payment
This is a step that you need to take before you actually begin to pay off your mortgage that can help you immensely down the line. The more money you put down on your home, the less interest you’ll pay over the life of your loan. This means that if all else remains equal between two mortgages with different APRs but similar terms and amounts borrowed (such as an 80/20 fixed-rate mortgage), then the total cost of borrowing will be lower on the 80% LTV loan than it would be on one where only 20% was paid up front.
2. Put More Towards Your Mortgage Every Month, Instead Of Making The Minimum Payment
The best way to pay down your mortgage is by paying more than the minimum due on it each month. If you can afford to do this and make a larger payment every time you get a bonus or raise, then great! This will lower your interest rate as well as get rid of that debt faster. If not, at least make sure that any extra money goes towards paying down the principal instead of just throwing it away on higher mortgage payments per month.
While it may be tempting to delay paying off your mortgage in favour of other financial goals, keep in mind that the faster you pay off your mortgage, the more money you will save over time.
For example: If a homeowner has a $200,000 mortgage at 5% interest and pays $2,000 per month for 30 years, he or she will owe about $115k in interest by the time the loan is paid off.
On the other hand: If that same homeowner decides to pay extra each month (say $300/month) towards their principal instead of using those funds on other things like vacations or new cars.
3. If You’re Eligible For A Decrease In Your Interest Rate, Take Advantage Of It!
If you have an existing home loan and are unsure if it is possible to lower your mortgage rate, simply check with your lender or broker. The first step is to determine if your current loan has any prepayment options. If so, it’s worth considering whether or not refinancing makes sense.
What should I do if I am not eligible for a lower interest rate?
If there is no opportunity to reduce the interest rate on your current mortgage, consider increasing the term of the loan by extending its length (and thus reducing monthly payments). Refinancing may still make sense depending on how much extra cash flow this would provide going forward and how much value can be realized from investing in growth assets (stocks/bonds) instead of paying off debt first before investing more money into something else like real estate investment properties or stocks/bonds which would generate greater returns than paying off high-interest debt quicker than necessary.
4. Earn Extra Money On The Side
If you’re trying to get out of debt and make the most of your money, it’s important to understand how much you can actually earn from a side hustle. In fact, there are many ways to bring in extra income without having to quit your day job or find the time and energy to start a new business. Do freelance work on the side. This could mean anything from dog walking (or dog sitting) for neighbors with busy schedules who need their pups taken care of while they’re at work or school, making deliveries for local stores or restaurants, setting up shop at farmers’ markets where people buy fresh produce directly from farmers, and entering data into spreadsheets for companies that rely heavily on data entry but don’t have enough staff available at any given time. The list goes on. Any additional financing can aid you in paying your mortgage off quicker.
5. Make Biweekly Payments
Making biweekly payments is another way to pay off your mortgage faster. The idea is that you’ll make half of your usual monthly payment every two weeks, instead of paying it all at the end of each month.
The logic behind this strategy is simple: by making an extra payment every six weeks (instead of once per year), you’ll be able to reduce the interest on your loan and pay off more principal quicker. Carrying less debt costs less in interest payments over time, which means that over time, it becomes easier and easier to afford those regular payments.
The journey to financial independence can be a long one, but it’s not impossible. The first step is to set your goals and start saving for them today. If you have any more questions related to my mortgage broker services, don’t hesitate to get in touch with me.