Want to pay off your mortgage faster?

10 tips for avoiding interest

Paying down your principal will shorten the life of your mortgage and save you thousands of dollars in interest. Here are some strategies to help you save some cash:

Prepay whenever you can
Find out what limitations your mortgage has on prepayment options – and pay as much as you can down on your principal without incurring a penalty. By paying off your principal faster, even just a little bit at a time, you could cut down your amortization period and save yourself thousands in the long run.

Pay as much as you can afford
Most mortgages let you increase your regular monthly/weekly/biweekly payments. Bump them up as much as you can – anything above the minimum goes towards your principal. If you hit a financial snag, most lenders will let you reduce payments to the previous amount. If your income goes up – make sure that your mortgage payments increase accordingly.

Increase the frequency of your payments
Pay bi-weekly instead of monthly, and you end up with the equivalent of an extra month’s payment every year. (Think about it: 52 weeks means 26 bi-weekly payments, which equals 13 months, not 12.) You reduce your principal faster, and chances are, you will not even notice those extra couple of payments.

Double up when you can
A lot of mortgages let you double your payments on a regular basis. If you can do it, go for it. It’s surprising how quickly that principal starts coming down.

Don’t skip payments
Your mortgage will likely have a “skip-a-payment” clause. Use it only if you absolutely have to, then double up the following month to get back on track.

Round up every month
If your mortgage payment is $972, round it up to an even $1000. That extra little bit will save you a remarkable amount in interest, and will not put too much of a dent in your monthly budget.

Pay lump sums often
Got a bit of extra money? Apply it to your mortgage. Use your RRSP tax rebate to pay down your principal, and make sure you include a percentage of bonuses, inheritances and monetary gifts.

If rates go down, keep your payments the same
You already know you can afford it, so keep your payment amount the same. There will be no difference in your monthly budget, and the extra money will make a big impact on getting that principal paid off.

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