Mortgage payments can go on and on and on unless you decide you want to speed up the process. If you’re buying your first home, one of the biggest fears is, of course, having to pay off the mortgage for an extended period of time, but there’s options for you that can help shorten the process and pay off the mortgage earlier than your amortization schedule. Here’s how you can cut back on costs and get your mortgage payments out of the way.
Accelerated bi-weekly payments
Instead of paying on a monthly basis, make bi-weekly payments, adding up to 26 payments yearly as opposed to 12. The 13 four-week payment periods in a year give you the extra two payments, and these extra payments are to your advantage as you pay more over the course of a year and could potentially cut three years off your mortgage payments.
Annual lump sum payment
Making a lump sum payment once a year after buying a house is a great way to chip away at your mortgage, even if it’s a small contribution. Most banks allow you to make an extra mortgage payment each year and it’s applied directly to the principal.
Round-up mortgage payments
It goes without saying, the faster you pay off your mortgage, the more you will save on interest. Rounding up your payments is a relatively simple way to pay off your mortgage faster. Whether it’s monthly or biweekly, committing an extra $25-$100 won’t be too stressful and will marginally help in the long run. A great way to adapt a rounding-up method during your mortgage payment is to throw the extra money you make when you get a raise to the mortgage instead of increasing your cost of living.
Take advantage of ‘found’ money
A birthday cheque, a bonus at work,an inheritance, investment earnings, or even winnings at the poker table are all sources of ‘found’ money. Applying this money to your mortgage will have no impact on your budget so it shouldn’t be hard to let go of. You can also consider increasing your RRSP contributions and then put your tax refund directly towards the principal of your mortgage.
Don't be the first time home buyer that gets in the groove of making automatic mortgage payments and then forgets about it. Stay up-to-date on interest rates and new mortgage options so that you can potentially save a ton of money just by understanding what your options are. If interest rates drop since you took your mortgage out, understanding what the penalties are for breaking your mortgage and applying for a lower interest rate can save you thousands in the long run.
Buying your first home the right way
Buying a house for the first time means you may not know the best way to tackle the market. Team Davids has the experience and resources available to make your dream home a reality. Whether you’re looking for houses for sale in Niagara Falls or elsewhere in the region, connect with Team Davids and find your next home.