How To Become Mortgage Free Sooner

How To Become Mortgage Free Sooner

Ever wonder how to pay off your mortgage faster? Owning your home sooner and becoming mortgage-free is a financial goal that many people strive for. Paying less money in the long run, freeing up cash after your payments are over and increasing your home equity are just some of the benefits of being mortgage free sooner. Learn the benefits of a Mainstreet mortgage here. 

In order to understand how to pay off your mortgage sooner, let’s start with understanding what makes up your mortgage payment. When you make a mortgage payment, a portion of the payment goes to the original mortgage amount owed (also referred to as the principal) while the other portion goes to paying off the interest. Typically, as time goes on, a higher portion on each mortgage payment goes towards paying off the mortgage principal vs the interest. Lowering the amount of interest you pay, helps put more of your payment towards the principal. 

Below, we will outline a few simple strategies that allow you to be mortgage free sooner. 

Change your mortgage payment schedule.

The first way you could shave years off your mortgage and save money is by changing your payment frequency or using accelerated payments. If you switch your monthly mortgage payment to a bi-weekly payment schedule you will make 26 smaller payments throughout the year. You can also opt to use accelerated semi-monthly or weekly payments. This method can be done by dividing your monthly payment into 2 or 4 smaller payments that total the monthly payment amount. Both accelerated and adjusted payment frequency can reduce the amount of interest paid on the mortgage, which can translate to saving thousands of dollars in interest over the lifetime of your mortgage and reduce the total amount owing to become mortgage free sooner. Reach out to a Mainstreet advisor to see which payment frequency works best for you.  

Shorten your amortization period

The amortization period of a mortgage is the length of time you have agreed upon to repay your mortgage. Instead of automatically picking the standard 25-year amortization period, you can choose a shorter amortization period to pay off your mortgage in fewer years. With this option, payments will be higher than a 25-year amortization period; however, if you have additional room in your budget to pay more each month, it means you will be paying less for your home in the long-run and own your home sooner. Use our mortgage calculator to understand how a shorter amortization period might benefit you.

Round up your payments 

Another great way to pay off your mortgage sooner is rounding up your scheduled payments. This option might have a minimal impact on your household budget but has big benefits and it can help you pay off your mortgage quicker. Adding a little extra to your mortgage payment, for example, from $1,950 to $2,000 or $2,400 to $2,500, is a great way to put extra money towards the principal amount and become mortgage free sooner by reducing the interest paid over the lifetime of your mortgage. Understand how rounded payments could pay down your mortgage quicker with our mortgage calculator

Take advantage of pre-payments 

Any time you have extra money available, consider putting it towards your mortgage to help reduce the principal amount owing. Mainstreet offers generous pre-payment options with all our mortgages which enables you to become mortgage free sooner. Our first option allows you to pay up to 20% of the original principal each year, for example, if your original mortgage was $300,000, you can pay up to $60,000 each year – even as the mortgage amount reduces over time. Secondly, monthly payments can be up to doubled. For example, if your mortgage payment is $1,500 you can double up your payment to $3,000 or pay somewhere in between if that fits your budget better. You can also make a lump sum payment towards your mortgage. This is a great way to use a tax refund or bonus, for example. Interested to know how pre-payments can get you mortgage free sooner? Book an appointment with one of our advisors.

Keep the same payment when you renew

As we know, mortgage rates fluctuate based on the Bank of Canada’s overnight rate. When your mortgage is up for renewal, if interest rates are lower than your current rate, you could opt to keep the same payment as your previous term to help pay more towards the principal amount of your mortgage. While it is enticing to reduce the payments when possible, the benefit of keeping the same payment as your previous term means that you can consistently put funds towards paying off your mortgage quicker and your household budget will remain the same. This method will save you thousands in interest over the lifetime of your mortgage.

Use income from your property to pay down your mortgage 

There are ways to make your property work for you. Perhaps you have a basement suite you could lease to help pay off your mortgage earlier or have a garage or storage space you can rent out. Using the additional income generated by renting out these vacant spaces and setting that towards your mortgage will pay off your mortgage quicker and in return you will build your home equity faster. Using our pre-payment options listed above, you can put this money directly towards the principal and reduce the interest paid over the lifetime of the mortgage.

Get Started Today

Whether your mortgage is with Mainstreet or not, book an appointment with a Mainstreet Advisor and we will work with you to discover how you can be mortgage free sooner. You can use our Mortgage Calculator to determine which options work best for you, or you can learn more about our Mainstreet Mortgages or view our rates.

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