Small Changes Make Big Differences!

Today, I decided to blog about small changes. Specifically, small changes with your mortgage. The majority of home buyers, purchase a house and obtain financing of some sort. The most common loan, is called a mortgage. The word “mortgage' literally translates to mort= death and gage= pledge in latin. Death pledge. We typically carry a mortgage between 25 – 30 years. Which may not seem bad however, it is a long term debt that is costing ALOT of money. Why aren't  many home owners trying to pay off their mortgage ? Is it something we just don't think about? Or are they comfortable with having a mortgage payment every month because they make enough money? Perhaps, it is a combination of many factors. I think everyone should aim to pay off our mortgages sooner than 25 years.

Here's why:

Let's take myself for an example. I have $256,000 left on my personal mortgage at 3.29% interest. If I took my mortgage to term lets say I had 25 years left of amortization, it would cost me $118,976.28 in interest. OUCH! That is a pretty nice car or perhaps quite a few luxury holidays, or even worse your children's education!! I get it... paying off $256,000 seems like a lot of money. Almost impossible. This is why I have come up with a few tips and tricks to reduce this LARGE interest amount and instead return it to your pocket.

Here's tips on how you can pay off your mortgage faster:

 

More frequent payments

  1. I have recently done this... Instead of doing monthly payments – I have switched to accelerated bi-weekly payments. Which results in saving interest costs because more frequent payments reduce compounding interest. By the end of the year, I will have contributed an extra $1492 to my mortgage yet, it wasn't all at once therefore it wasn't noticeable.

Round up

  1. My monthly mortgage payment was $1284 a month. When I switched to accelerated bi-weekly, my new payment amounted to $640. I decided to round up to $650 every two weeks. The $10 isn't going to harm my budget – it won't even be noticeable. However, I will notice my interest savings at the end. From rounding up, I will save a whole $16,746.27 in borrowing cost simply from an extra $10 bi-weekly. Not tough.

     

Extra Cash

  1. Use any unexpected amounts of cash you receive towards your mortgage. For example, income tax refund, inheritance, gifts, bonuses at work. Most lenders will allow you to pay up to 20-25% of your mortgage prior to your term ending.

RRSP's

  1. Depending on your circumstances, maybe it's not a bad idea to increase your mortgage payments instead of contributing to an RRSP;s. Or simply use the income tax refund at the end of the year towards it.

Roomates

  1. While I understand Roomates may not be convenient for everyone- some home owners find it a great way to increase income and pay off the mortgage faster. I personally rent a room in my house for $850 a month! That's $10,200 a year – aka one step closer to NO more “death pledge”.

With all this being said, the fact you have a mortgage and you aren't paying rent anymore is really great thing. However, we get lost in that idea and don't realize how a few small changes can really make a big difference. Nobody wants to be paying debt off forever! And for those of you who already do these things- thumbs up! If you have any questions in regards to the financial side of things- please contact me today and I can recommend an appropriate mortgage broker, financial coach, financial advisor or bank associate to cater to your needs. 

Have a great weekend and stay cool everyone!

Melissa

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Melissa Morin

Melissa Morin

REALTORĀ®
CENTURY 21 Advantage
Contact Me

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