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Top Five Ways to Be Mortgage Free Sooner

HOW-TO Author: Steve Dyment

Every week I get someone asking me if there are any tips or tricks to paying down your mortgage faster. While there are several, some of the best ones aren't that complicated and only require an individual to learn the techniques and then put them into practice. Here a few creative ways that can help you be mortgage free in less time:

1. Bi-weekly accelerated payments

I know you have heard this one before but it's so effective that it bears repeating. If you are currently paying your mortgage monthly, I encourage you to contact your lender and ask to have your payments switched to 'bi-weekly accelerated'. What that means is that your monthly payment will be cut in half but you will pay it every two weeks. Since they are a little more than four weeks in a month, at the end of the year you will have made an extra two payments (the equivalent of one month) and this will all be applied to your principal. Studies have shown that this technique along can reduce your mortgage amortization by up to four and half years. Don't wait.

2. Increase your payments 5% every year

This sly technique takes little work but reaps BIG rewards in the long term. The plan is simple: Every year speak to your lender and ask to have your mortgage payments increased by 5%. The payment change is so small that it shouldn't affect your budget yet the upside can be tens of thousands of dollars in interest costs over the course of your mortgage. More importantly, you can be mortgage free sooner!

3. Use your tax refund as a lump sum payment

This one is as easy as it sounds but takes discipline as so many of us like to treat ourselves when we get a tax refund. Obviously, this only applies to those of us who receive a refund from Revenue Canada but it's worth doing as it too, can save you thousands of dollars in interest costs.

4. Stay informed on interest rates

As interest rates rise and fall, there will be times when you find yourself stuck with a mortgage rate that is no longer competitive. Sometimes it will downright stink. Whatever you do, don't stick your head in the sand and try to forget about it. If you find yourself in a mortgage that is 1% or more above what current rates are (you can check out www.creativemortgage.ca for rates), then you owe it to yourself to consider refinancing. Yes, there will be a payout penalty but often the potential savings can still put you ahead by thousands of dollars. A few years ago, my wife and I payed out our existing mortgage and refinanced at a lower rate and our payments dropped $600/month. As you can imagine, even after paying out our penalty, we were miles ahead.

5. Refinance at a lower rate but keep making the same payments

This can a very smart move but it takes discipline. I know a few savvy individuals who have been doing this for years and their now tiny mortgage balances speak for themselves. ¨Here's how you can accomplish this: If you can refinance your mortgage at a lower rate, request that your payment amount stay the same as it was previously. Now, let's say the difference was $400 per month. This $400/month or approx. $5000/year is now directly reducing your mortgage balance. You are paying your mortgage down by thousands more every year but with the same old payment amount!

Conclusion

There you have it: five ideas that can help you be mortgage free sooner. Now, I realize that some of these ideas may sound good to you, but you don't know where or how to start. In that case, I would be happy to help to you. If you are interested in learning more money saving strategies, obtaining a lower rate, or incorporating these ideas into your own mortgage, please don't hesitate to contact me.

Contact Information | Creative Mortgage Corp.
Name:	Steve Dyment
Company:	Creative Mortgage Corp.
City:	Kelowna
Province:	British Columbia
Country:	Canada
Phone:	(250) 470 9154
Email:	Email
Website:	http://www.creativemortgage.ca