The other day, I came across this great article from the Globe & Mail advising readers to pay their mortgages like they did in 2007 when rates were 36 per cent higher. Brilliant advice because, well, why not? Pay more now while the rates are at a low point and when rates cycle back around, which is inevitable, you'll be ahead of the game.
Sound good? Here are some powerful ways to help you pay more now and own your home faster:
Increase your payment amount when you arrange your mortgage, or at any time during the term. This is right in line with what Robert McListeris says in the Globe & Mail article. If you increase your mortgage payment amount by $170 from $830 to $1,000 you could save almost $48,000 in interest over the entire amortization period of your mortgage. You could also own your home about 8 years earlier.
Round up your payments. For example, if your bi-weekly mortgage payment is $567, consider rounding up to $600. The extra $33 won’t break your budget, but it will help you considerably in the long run. Check out this handy mortgage calculator to see how much you will save by increasing your payments by just a few dollars.
Increase your payments each time you get a raise at work. You can afford it now, so why the heck not? You may even want to increase it by the same percentage point as your raise.
Stay informed, so you can keep track of where rates are and when your extra payments will make the biggest dents. Rates wont stay this low, so be in the know.
Make an annual anniversary payment. Most mortgages allow you to make a lump payment that goes directly to your principal, as long as there isn't any outstanding interest owing. Use the anniversary date of your mortgage to make an extra payment. Even just $100 will make a difference.
Put "found money" toward your mortgage. Again, this is along the lines of lump payments but any time you come into found money - that which isn't part of your regular income, like gifts, inheritance, tax refund - pay it all toward your mortgage. Every little bit helps.
If you're shopping for a mortgage right now, here are the best rates from Bryan Guertin at Mortgage Intelligence:
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