The fastest way to pay off your mortgage
The fastest way to pay off your mortgage
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Here's how to pay off your mortgage loan as quicky as possible.
Are you tired of paying interest on your mortgage loan? Here’s how to pay off your mortgage loan as quickly as possible.
Increase payment amounts
When interest rates are low, it can be tempting to extend your amortization period. However, this is the ideal time to increase your mortgage payments.
There’s no need to double down! Often, you can make a big difference without busting your budget.
| Mortgage: $100,000 Interest rate: 4% |
||
| Payment | $600/month | $775/month |
| Amortization | 20 years and 3 months | 14 years |
Read your mortgage contract carefully to make sure your financial Institution has this option and if a penalty could apply.
Increase payment frequency
If you pay on a monthly basis, check with your lender to see if you can switch to one of the following options:
- Bi-weekly
- Accelerated bi-weekly
- Weekly
- Accelerated weekly
You will shorten your mortgage amortization period and lower the amount of interest paid.
| Mortgage: $100,000 Interest rate: 4% |
||
| Payment | $526.02/month | $170.10/week |
| Amortization | 25 years | 15 years |
| Accured interest (amortization) |
$57,806 | $32,678 |
Make lump-sum down payments
Do you have extra money saved up?
Rather than blow it all on champagne and caviar, why not use it to pay down your mortgage. That way, you will save on interest.
See for yourself.
| Mortgage: $100,000 Interest rate: 4% Amortization: 25 years Term: 5 years |
||
| No lump-sum payment | An extra $1,000, every year | |
| Total cost | $157,806.06 | $143,827.97 |
| Interest (amortization) | $57,806.06 | $43,827.97 |
Could you be penalized?
In general, you can make a lump-sum reimbursement of up to 15% of the initial amount every year.
If you exceed this percentage, your lender could penalize you.
Before making lump sum payments on your mortgage, make sure to calculate whether or not this is in your best interest.
When renewing a mortgage
Continue to pay the same amount
When renewing your mortgage, stay the course and at the very least continue paying the same amount even though it seems like your mortgage is melting away.
That way, if the interest rate drops, you will shorten your amortization period and be mortgage-free earlier.
Shorten your mortgage amortization period
When renewing your mortgage, consider shortening the amortization period, while respecting your ability to pay.
By amortizing a $100,000 mortgage over 20 years instead of 25, you can save $13,300 in interest.
| Mortgage: $100,000 Interest rate: 4% |
||
| Amortization | 25 years | 20 years |
| Payment | $547.06/month | $628.42/month |
| Interest (amortization) | $60,118.29 | $46,819.91 |
Note: This blog post is provided for information purposes only. It is not a substitute for professional legal, financial or fiscal advice. For advice specific to your personal situation, always speak with your advisor. SSQ cannot be held responsible for any decision made as a result of reading this blog post.
