When it comes to homeownership, many of us dream of the day we will be mortgage-free. While most are 25-year amortizations, there are some ways you can pay off your mortgage quicker!

Did you know? There are a few ways you can help pay off your mortgage faster, such as with an accelerated bi-weekly payment schedule, increasing your monthly mortgage payments to pay more to the principal, making extra payments on your mortgage, refinancing to a shorter amortization period or TAKING OUT AN RRSP LOAN.

Let’s look at the options and how they work:

1. Review Your Payment Schedule:Looking at your payment schedule can be an easy way to start paying down your mortgage faster, such as moving to an accelerated bi-weekly payment schedule. While this will lead to slightly higher monthly payments, the overall result is approximately one extra payment on your mortgage per calendar year. This can reduce the total amortization by multiple years, which is an effective way to whittle down your amortization faster.
2. Increase Your Mortgage Payments*:This is another simple change you can execute today to start having more of an impact on your mortgage. Most lenders offer some sort of pre-payment privilege that allows you to increase your payment amount without penalty. This payment increase allowance can range from 10% to 20% payment increase from the original payment amount. If you earned a raise at work, or have come into some money, consider putting those funds right into your mortgage to help reduce your mortgage balance without you feeling like you are having to change your spending habits.
3. Make Extra Payments*:For those of you who have pre-payment privileges on your mortgage, this is a great option for paying it down faster. The extra payment option allows you to do an annual lump-sum payment of 15-20% of the original loan amount to help clear out some of your loans! Some mortgages will allow you to increase your payment by this pre-payment privilege percentage amount as well. This is another great way to utilize any extra money you may have earned, such as from a bonus at work or an inheritance.
4. Refinance to a Shorter Amortization Period:Consider the term of your mortgage. If you’re mortgage is coming up for renewal, this is a great time to look at refinancing to a shorter amortization period. While this will lead to higher monthly payments, you will be paying less interest over the life of the loan. If you’re interested in this, connect with me today so we can calculate if it is worthwhile for you to take advantage! Knowing what you can afford and how quickly you want to be mortgage-free can help you determine the best new amortization schedule.
5. Taking out an RRSP loan:Lastly, consider an RRSP loan.

“What are you talking about?” “This sounds like a tinfoil hat theory.” Hear me out!

The idea is. Step one, take a loan out and invest it into your RRSP. Try to do this before the RRSP cut off typically in early February of each year. Step two: You will receive an income tax refund from the government (because you purchased an RRSP) use that plus your monthly payments to pay off the loan as quick as possible, ideally one year. Step three: Repeat in this investment strategy every year.

Yes, you will pay interest on the money you borrow and likely more interest paid than you earned on the investment (in the first year). In the second year the loan will be paid off and you won’t be paying any interest but the money you invested in the first year 9will now be in it’s second year) and will be earning interest.

Using your excess cash to invest money in yourself rather than paying off your mortgage is a good investment. Think of it this way. If you owe the bank $100,000.00 and you have $100,000.00 in the bank. Are you not debt free? The biggest difference with my theory vs. just giving your money to bank (trying to pay off you mortgage early) is you will always have control over your money. Once you give your money to the bank, you will no longer have access to that money. If you ever need that money again, it may be hard to get it out of a mortgage. Call me if you want more info.

*These options are only available for some mortgage products. Check your mortgage package or reach out to me to ensure these options are available to you and avoid any potential penalties.

If you’re looking to pay your mortgage off quicker, don’t hesitate to contact me or call me to go over your options in more detail!