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The Road to Mortgage Freedom


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Blog by John Jennings | June 2nd, 2015


The Road to Mortgage Freedom.

Paying off your mortgage may be the best investment you can make. A survey conducted in 2013 by Canada Mortgage and Housing Corporation (CMHC) found that 68% of homeowners felt they could pay off their mortgage early. Last year a Scotiabank poll found that almost two-thirds of mortgage-holders agreed they could pay off their mortgage faster without impacting their lifestyle. Here are some ways to save some serious money and become mortgage-free faster. It only takes a few small steps and saves you thousands of dollars in the process.

Accelerate your payment frequency

This is popular. If you're making monthly payments on a $400,000 mortgage with a 3% interest rate, amortized over 25 years, it will cost you $169,054 in interest. By increasing your payment frequency to accelerated bi-weekly payments, you will shave over three years off of your amortization schedule, and save $21,462 in interest.

 

 

Round up your mortgage payment.

This is pretty painless. Every dollar counts when it comes to paying off your mortgage. If your accelerated bi-weekly mortgage payments are $543, consider rounding up to $600 instead. The extra $57 will save you thousands of dollars in interest over the term of your mortgage and you'll barely notice the difference in your monthly budget.

Refinance to a shorter-term amortization

You may be able to refinance into a mortgage with a lower amortization. Your payments will be higher on a 15-year loan, but perhaps not as high as you think, especially in the current low-interest environment.

Make lump sum payments

Adding just $1,000 extra to your mortgage per year will allow you to pay it off years sooner and, combined with accelerated bi-weekly payments, chip thousands of dollars off the interest you pay for your home.

A lower interest rate

With mortgage rates at all-time lows it doesn't hurt to negotiate a better rate. The difference between a rate of 2.59% and say 3.20% adds up to thousands of dollars in interest over the remaining term of the mortgage.

Interestingly, the Scotiabank poll also showed that 21% of mortgage holders have not taken any steps to pay down their mortgage for the following reasons:

  1. Don't have available funds
  2. Have other payment priorities
  3. Don't know what steps to take

The freedom of being mortgage debt free is a dream for many Canadians. If you're unsure of what your next step should be, call me. Together we can review your mortgage, look at your financial picture and devise a mortgage-reduction plan that works for you.

Jerry Sims, AMP
Mortgage Consultant
TMG The Mortgage Group Canada Inc.
c 604.808.3420
f  778.373.3900

jerrysims@shaw.ca