Reducing Your Mortgage Faster
Getting out of debt is a common goal and we look forward to the day we can host our mortgage burning party or frame our accomplishment. Back in October the TD bank announced it was raising the variable rate mortgage in response to new mortgage rules announced by the federal government. These rules were meant to ensure people can afford the homes they buy, even if interest rates go up. Who wants to pay more interest than they have to? Here are some tips that will help you get your home paid off faster.
- It’s tax time and for many Whitehorse residents, that northern residents deductions are having a positive impact on how much personal income tax they have to pay.If you lived or received travel benefits for working here in Whitehorse, there are some specific deductions you’re entitled to. If this means a tax rebate is coming to you, consider using your refund to help pay down your mortgage.
- If you haven’t yet, consider a bi-weekly mortgage payment instead of monthly. You’ll make half of your mortgage payment every other week instead of monthly. This schedule allows you to make 13 payments a year and can shorten the length of your mortgage by approximately 6 years.
- Most of us use online banking and it’s pretty simple to set up a transfer from the account you normally use, into a savings account. Divide your monthly payment by 12, and start saving up for an extra mortgage payment. If you don’t want to do the bi-weekly payment, this is another option. Even adding an extra $25 to each payment can add up to big interest savings over the term of your mortgage.
- We’ve all heard that it’s best to live within our means, which practically speaking means calculating a monthly budget based on your actual income, re-evaluating the essential payments and reducing the amount you spend on the non-essentials. Whatever you’re able to not spend each month can be applied to paying down your mortgage. Budgeting sounds about as much fun as the word “diet”, but it doesn’t take long before the monthly statements are showing an impressive difference to your debt and that can be very motivating. It’s the financial equivalent to admiring the new you in the mirror. Imagining what you can use your income for when you no longer have to apply it to your mortgage can also be very motivating.
Be sure to check your own mortgage terms to avoid prepayment penalties. If you happen to win the lottery, receive a windfall of some kind, you’ll want to know how much you can pay down without penalty. Or, maybe the penalty will be worth it, and that will be the least of your worries.