Have you ever thought about paying off your mortgage quicker?  Have you ever had some money you wanted to invest, but just didn’t know where to put your money?  Bumping up your mortgage payment can save you a fortune over the years ahead.

Consider our happy newlyweds Dick and Jane. They live in Burlington, Ontario in a three-bedroom, two-storey home. They owe $200,000 on their mortgage at 6.5 per cent. Right now, they are making monthly payments of $1,340 and are on track to pay off their house in 25 years. Based on their current schedule, they will wind up paying more than $200,000 in interest over the life of their mortgage.  See what happens if Dick and Jane decided they wanted to pay off their mortgage a little quicker.

1st scenario: If Dick and Jane simply increase their monthly mortgage payment by $180 to $1,520 a month, they can pay off their mortgage in 19 years and save $53,510 in interest costs.

2nd scenario: If Dick and Jane split their current monthly payment in two and pay every two weeks instead of monthly, they increase their total mortgage payments from $16,075 a year to $17,415 a year. That means they pay off their mortgage in 21 years instead of 25 years, and save nearly $40,000 in interest costs.

3rd scenario: If Dick and Jane keep making their current monthly payment, but add an additional payment of $7,000 once a year, they pay off their mortgage in 13 years and save $107,000 in interest.

In most cases, homeowners can arrange to take advantage of any of these options simply by calling their bank. But whatever strategy Dick and Jane choose, they should resist the temptation to choose banks’ latest mortgage “deal,” which consists of the ability to skip a payment once a year. While that may seem enticing, such a strategy would stretch out Dick and Jane’s mortgage payments to almost 31 years. They would pay a whopping $263,000 in interest costs over the life of their mortgage, or $61,000 more than if they had stuck with the original 25-year monthly payment schedule.

For more help on how to pay off your mortgage quicker, please contact me today so we can chat about saving thousands of dollars in interest by adding a few dollars per month to your mortgage payments.