Tips for Paying Off Your Mortgage Faster
For many Canadian homeowners, paying off their mortgage as quickly as possible is a top priority. Paying down extra principal in the early years by whatever means possible can shorten the life of your mortgage - and dramatically lower the interest you'll pay over the long haul. Here are a few tips on how to make this happen:
1. Increase your payment annually to the most you can afford. The upside is that most lenders will allow you to reduce it again to the previous level if it turns out to be too great a burden or your circumstances change.
2. Prepayments give great return on investment If, for example, you pay an average of 6.0% in mortgage interest, for each $1,000 by which you reduce your mortgage principal, you will save $60 in after tax cash every year.
3. Utilize your RRSP-driven tax rebate as a mortgage prepayment method. Even if you can only prepay annually, make sure tax refunds are set aside for paying down your mortgage. Many Canadians borrow (at prime) to buy an RRSP to ensure the maximum rebate. When applied to the mortgage principal, this refund is a "gift that keeps on giving". Combining the refund with the tax-free interest earned on the RRSP over the subsequent years will quickly outpace the short-term interest costs of the RRSP loan.
4. Increase the frequency of your payments. Make accelerated bi-weekly payments to get a "free" principal reduction equivalent to one full mortgage payment every year - painlessly. It pays to have a mortgage reduction strategy in place. For expert advice throughout the mortgage process - and a mortgage that is right for your needs - contact me for a great mortgage specialist
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Diane Plant, Broker TORONTO REAL ESTATE WEBSITE
Re/Max Realtron Realty Inc, Brokerage
(416) 782-8882
I proudly server buyers and sellers in the Greater Toronto neighbourhoods of: Forest Hill, Cedarvale, North York, North Toronto, Summit Heights, Wilson Height, Bathurst Manor, Leaside, Bayview, Thornhill, Richmond Hill and all surrounding areas.
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