Mortgage – Tricks and Tips on how to pay it off faster, Fakruz Zaman
Most of us are making a mortgage payment which could be a larger or smaller amount with different amortization period or rates on it. Mortgage or rent payments are the biggest and the most important payment we all make with almost no exceptions.
We all must setup a plan upon taking the responsibility of this mortgage payment. It is completely up to us on how fast we pay off this mortgage as long as there is a plan in place and use some tips and tricks to pay it off faster.
There are two types of debt payments. One is a bad debt payment such as credit card payment to avoid high interest rates over the long period of time and the other is a good debt payment which could be a mortgage payment. But we have to apply extreme caution on taking a mortgage amount that we could carry over the period of 15-25years which is a huge responsibility and could turn into a bad debt if caution is not applied. Therefore it is not a good idea to consider all mortgage payments as good debt.
Economists, financial advisors and mortgage specialists always say a mortgage of any type is a good debt but personally I don’t agree with that opinion after seeing many foreclosures. In case of a job loss, ill-health or death of primary earning member, family break- up could make a mortgage payment completely unaffordable which could force a family towards foreclosure unless that mortgage is protected or insured.
To avoid all this kind of situation explained I would like to share some tips and tricks on how to pay off a mortgage faster, how to protect the mortgage in case our loved ones have to meet any unexpected circumstance.
Take only the mortgage amount that we can afford by not affecting standard of living
Use a mortgage affordability calculator to see what you can afford and what not. Link below could be useful:
Must make sure mortgage amount is protected either by a term life insurance for the double the amount of the mortgage which is the cheapest way to protect your mortgage. However if not comfortable you can also take a mortgage insurance from your bank which could be more expensive but with less coverage.
Also it is a good idea to have some kind of disability insurance coverage in place just in case and only if that payment is affordable.
If possible try to put a down payment larger than 25% which will not only help you to save money to avoid CMHC insurance payment also a larger down payment will reduce your monthly or bi weekly payment.
As a trick it would be a good idea to add the amount saved by avoiding CMHC insurance payment to mortgage payment which will reduce the amortization.
We must choose bi weekly payment option which will automatically reduce good number of years from the amortization period without costing us more money.
Let us not be shy to negotiate the rate with lender or check with different banks and mortgage brokers. Sometimes mortgage brokers will shop around for you to get better rate but always read the fine print. Large banks also do rate match.
You can check different websites for good rate. Link below is a very good one as it provides rates from different institutions
Received a bonus, a good amount for your tax return, big commission payment or any extra income. Excellent! Let’s put a portion that extra income towards your mortgage payment to reduce the amortization period.
You can increase your mortgage payment by calling your lender or visiting the branch on any time of the year. If not twice in a year it is highly recommended to do it at least once in a year, besides making a lump sum payment once in a year.
Don’t accept the lower mortgage payment when time comes to renew your mortgage after five years. It is highly recommended to continue with same amount of payment if not more which will also reduce amortization period means paying your mortgage faster by saving on interest payment.
For small or medium size mortgage amount it is a good idea to select variable mortgage but keep in mind to be ready in case rates go up then you can afford the slight increase in payment but still it is a savings to stay with variable mortgage. This is good for someone who regularly follows the market trend and rates.
It is also a good idea to have a variable mortgage on larger mortgage amounts as the savings could be huge but we have to have the stomach to digest the ups and downs in the payment and be able to afford the slight increase but for someone who is conservative on rates and payments then it is a good idea to have a fixed rate for five years as the rates are quite low compare to what it used to be 15-20 to years back.
Congratulations for following these tricks and tips,now your house is completely paid off.
Don’t forget to collect your mortgage free certificate.
Now it is time to renovate the house to make it a better place to live. Your house will pay itself for the renovation as you did all the hard work to pay off this mortgage faster and established a good relationship with your financial institution. You can easily get a secure line of credit for that purpose. Get a plan to do one part of renovation instead of doing a large project at a time and follow the steps above to pay it off faster and only then move to second phase which will not put you under any kind of financial burden at all as the amount is so small compare to the original mortgage you took years back.
I am confident if we follow these rules religiously we could be mortgage free much faster than anticipated. I have written all these points only from my own experience on dealing with mortgage over the period of years in the past and I am not a specialist in this field and will not assume any responsibility.
Let’s live mortgage free sooner and enjoy life to the fullest rather than being mortgage poor.