Paying off your mortgage faster in Canada can save you a significant amount in interest and help you become debt-free sooner. Here are the top 5 tips to achieve that:
1. Make Biweekly Payments
Instead of making one monthly payment, switch to biweekly payments. This results in 26 half-payments, which equals 13 full payments each year instead of 12. That extra payment can significantly reduce the interest over time.
2. Pay Extra Toward the Principal
Whenever you can, make extra payments that go directly toward the principal balance. Even small additional amounts such as $100 can have a huge impact, especially if done consistently over the life of the loan. Usually you can make lump sum payments up to 15-20% of your original mortgage amount without penalty.
3. Refinance to a Lower Interest Rate
Refinancing from a higher rate to a lower rate can significantly reduce the interest paid over time. Although you may have to pay a penalty to change the mortgage, often you will save and pay less interest in the long run.
4. Round Up Your Mortgage Payment
Round up your regular mortgage payment to the next $100. For instance, if your bi-weekly payment is $1321, round it up to $1400. Chances are you won’t even remember you did it a month later and that extra amount goes straight to principal.
5. Shorten the Amortization Period
When your mortgage renews, try to shorten the length of your amortization period (e.g., from 25 years to 23 or even 20 years) can dramatically lower the total interest paid and get you mortgage-free faster.
By following these strategies, you can minimize interest and accelerate the path to being mortgage free faster!