Do The Math Based On When You Want to Retire
Do you dream of early retirement? Paying your mortgage off before the original deadline can be a step in the right direction toward fulfilling your dream.
Start by determining by what age you want to retire and count backward. Next, calculate how much you'll need to add to your current monthly payments to reach your target date.
Refinance your Mortgage
If you're a homeowner looking to pay off your mortgage faster, going from a 25 to a 10-year mortgage through refinancing might be the right step for you. While the amount of your monthly payment will increase, your repayment time will be shortened by fifteen years.
The steps involved in refinancing will be very similar to your first mortgage. Start with your credit score, gather financial documents, compare mortgage rates, and get ready to start saying good-bye to your mortgage.
Tip Your Mortgage Payment
Think of your monthly mortgage payment as a service and add a 'tip' of your choosing. An extra 10 percent each month can chip away at your mortgage like this: if you regularly pay $1,000 monthly, adding an additional 10% would mean paying an extra $100 per payment. Check with your lender to ensure the extra money will go toward the loan principal, not interest.
Why It’s A Good Idea
Paying off your mortgage early can do more than deliver a sense of achievement; it can have some very real benefits to your financial well-being, including:
Saving Money on Interest
Fewer payments mean less interest, and that can be especially significant if your mortgage payment is hefty. Always double-check to make sure there isn't an additional penalty for paying off early.
Building Equity in Your Home
The quicker you repay your mortgage, the faster equity builds in your home. Equity is that portion of your home that you actually own. If you decide to sell, while you are still paying off your mortgage, having more equity can translate into more money in your bank.
Because you will have a smaller amount on your mortgage to repay, you'll get a more substantial amount from the sale. You can also leverage home equity should you need to take out a line of credit or secure a loan.
From reduced fees to potential reimbursements, talk to your tax professional about maximizing the benefits of paying off your mortgage early.
Overall Reduction of Stresses and Increased Peace of Mind
A healthy financial life means more than money in the bank, it means peace of mind. If you're one of the thousands of Canadians feeling an overwhelming burden by being in debt, you'll sleep better paying off your mortgage faster and moving closer to living debt-free.
To put yourself in a sound financial position, start by comparing and finding the best mortgage rates, and learning about the mortgage pre-approval process. Then when you find your dream house, you'll be ready to call it home.