Qualifying for a mortgage is an important step in anyone's life. It's a sign that you've worked hard enough and saved up enough money to be able to own your own home. It's a time for celebration, with homeownership being a dream or life goal for so many people. However, once the party is over, you have to start thinking seriously about how you're going to pay all that money back.
A mortgage is probably the most significant form of debt you'll ever have to pay off, and it can affect your life in numerous ways. If not managed properly, a mortgage can delay your retirement, reduce your pension, and drastically alter your overall quality of life in terms of the things you can afford to buy and do.
That's why so many people want to pay off their mortgage as quickly as possible. It can seem like quite a challenge, and even if you make huge efforts and big changes to try and pay off your mortgage more quickly, it will still most likely take many years. Nevertheless, there are several ways you can start cutting into that debt and wiping paying it off much faster.
Make Bigger Payments
Obviously, one of the simplest ways to pay off your mortgage faster is to simply increase the size of the payments you make. If you have any money leftover at the end of the month, simply add it onto your regular payment if your mortgage terms allow for this. Even if it might not seem like much at first, every extra bit of money you throw at the mortgage will gradually help to bring it down and result in the debt being cleared more quickly. There are a few different ways you can do this. You could simply make an extra payment per quarter, or try and make one additional payment per year, or you could simply round up your regular payments to the nearest hundred. Every mortgage lender and every specific mortgage has certain restrictions with regards to how much you can add on in addition to your standard monthly mortgage payment. It’s important that you review your specific mortgage terms before making any additional payments so that you could avoid any surprise and potentially hefty penalties.
Switch to Bi-Weekly Payments
Usually, your bank will offer to let you make your mortgage payments either monthly or bi-weekly. Choosing bi-weekly payments is a really simple way to start paying off your mortgage at a quicker pace.
Why? Well, if you make monthly payments, there are 12 months in a year, so you'll make 12 full payments annually. If you choose bi-weekly payments, you'll be making half-payments every two weeks. With 52 weeks in a year, that works out at 26 half-payments or 13 full payments. By choosing bi-weekly payment, you are essentially adding an extra month of payment onto the year when compared to the monthly payment plan. This can slice a lot of time off your total payment term.
Taking out another kind of loan might seem counter-productive to anyone wanting to pay off their debt sooner, but refinancing your mortgage could actually help you pay it off faster in the long run. When you refinance at the right time, you can get a much lower interest rate, as well as the potential to shorten the term of the loan and increase the amount of your monthly payments, as long as you can afford to do so. You can pay off your mortgage years earlier with this method, but you do need to weigh the risks and ensure that you're getting a better rate before you decide to go through with it.
Consider Mortgage Recasting
Recasting is another great way to cut down on the amount of time you need to pay back a mortgage. Recasting works as follows: you make a large, one-off, lump sum payment to the principal, thereby significantly reducing the value of your debt. The bank will then recast or recalculate your mortgage according to the newly reduced principal. The exact requirements for recasting can vary from one financial institution to the next, but it's a great option if you get a sudden windfall of money, like an unexpected bonus at work or an inheritance.
Pay Off Other Debts
If you have other debts with high interest rates, paying them off as quickly as possible can help you focus on your mortgage more effectively. With any collection of debts, you should always try and pay off the higher interest debts as fast as possible. Otherwise, even if you're saving money elsewhere, you'll still be losing out due to those high interest rates. Focus on high interest lines of credit, credit card debts, and other personal loans first. This will help give yourself more freedom to focus on the mortgage afterwards.
Cut Down On Needless Expenses
Almost everyone is guilty of wasting money on things they simply don't need. Perhaps you have a habit of signing up for too many subscription plans. Maybe you tend to eat out at restaurants more times than you can really afford. Maybe you have a shopping habit that you could try to work on. In any case, by looking at your expenses each month via your bank account, you can figure out exactly where you're losing money needlessly. Even just a small amount saved can go towards bigger mortgage payments and help you get rid of that debt a lot more quickly.
Start Paying Off The Principal As Fast As Possible
When it comes to mortgages, the principal is what you really need to focus on. In the early stages, it might seem like all you're really doing is paying off the interest, and the principal remains untouched. However, as soon as you can break through that barrier and start bringing the principal down, you'll really notice a big difference and rapid change in your debt. You can do this by making extra payments, larger payments, or simply rounding up your regular payments each time.
Seek Out A Secondary Income
It's often easier said than done, but having more money and a stronger income will, of course, also help you greatly when you want to pay off your mortgage faster. Havin a secondary income will give you more disposable cash to make bigger and extra mortgage payments as desired. There are many opportunities out there for people wanting to earn a little extra money on the side, from renting out a room in your house to looking for work online.
Here at Clover Mortgage, our expert mortgage brokers are ready and waiting to provide mortgage guidance and assistance.
Email us at firstname.lastname@example.org to learn more or give us a call on 416-674-6222 to speak with one of our mortgage experts today.