Owning your home, free and clear of a mortgage, is a great feeling. Perhaps that is one of your primary financial goals. If so, we have strategies to help you become mortgage-free faster.
And as you build the equity in your home, you have borrowing power to use later if you need it. It’s like saving for a rainy day.
Shorten your mortgage with Servus payment options
Make a larger down payment
Don’t borrow as much money in the first place and you’ll have that mortgage paid off sooner. Don’t forget to keep some cash for those unexpected bills, like closing costs and moving expenses.
Increase your payment frequency
When you make your mortgage payment weekly or bi-weekly you are paying more toward your principal, saving you thousands of dollars in interest and shortening the amount of time it takes to pay off your mortgage. If you choose an accelerated payment plan, not only are you paying more frequently, but you’re making extra payments over the course of the year.
Increase your payment amount
If your mortgage has an option to increase your payment amount, and you can afford it, boost your payments a little. The extra money goes directly toward your mortgage principal.
Make lump sum payments
You have a few options here. If you have an open mortgage you can pay money toward your principal at any time. If you have a closed mortgage you may have pre-payment options that allow you to make annual lump sum payments. You can also make a lump sum payment when your mortgage term comes up for renewal, before your new term comes into effect.
Select a shorter amortization period
Decide how much you can afford to pay each month. If you can afford the higher mortgage payments then select a shorter amortization and save thousands of dollars in interest.
Some strategies to find extra cash
You want to pay your mortgage faster, but there is only so much money in your budget. Here are some easy ways to find a little extra cash that will add up to a big difference.
- Earn Profit Share dividends on your mortgage and your other Servus banking. Use the money to pay down your mortgage faster.
- Put some or all of the extra money you get from a raise or cost of living increase toward your regular mortgage payment. .
- Invest in your RRSP and use your tax refund to make a lump-sum payment on your mortgage.
- Round your mortgage payment amount up when you first set your mortgage term. For example, if your bi-weekly payment is $520.67 round it up to an even $525 or $550. You probably won’t even notice the difference.
- Don’t reduce your payment, even if the interest rates go down. That extra money will be applied to your principal.
Other things to consider
- Before you put all of your extra money toward your mortgage you need to think about what else that money might be needed for.
- Do you have money in reserve for emergencies? Remember, you have other expenses besides your mortgage.
- Have you started saving toward your retirement? Sound financial planning considers your needs now and in the future.
- Is your budget already tight? Don’t increase your mortgage payments so much that you feel strapped for cash.
- Could you earn more by investing that money? If your mortgage rate is very low and you can earn more by investing the money, consider investing your extra cash for awhile. You can always use it for your mortgage later, and you’ll have more of it.
You don’t need to make these decisions alone. Our financial advisors can help you decide how best to meet your financial goals.