3 strategies to pay off your mortgage faster

Imagine life without your mortgage – all that spare cash, the satisfaction of knowing you own your home outright. To make it a reality, you need to pay off two things:

• Mortgage principal – The amount remaining of what you borrowed to buy your home.
• Mortgage interest – Any interest you were charged on the principal while it was owing.

Most people focus on minimizing their mortgage rate to save on interest and ensure more of their payments go towards their principal. That’s a good strategy, but it’s not the only way to pay off your mortgage faster.

1. Switch to accelerated bi-weekly payments

At first glance, you may wonder how this strategy helps. After all, you still pay $2,630 a month, just split into a payment every two weeks. That’s because most months aren’t four weeks long (i.e. 28 days) so, although there are 12 months in a year, we have 26 bi-weekly cycles. Consequently, on an accelerated bi-weekly schedule, you make the equivalent of one extra monthly mortgage payment each year.

Result

With accelerated bi-weekly payments:

• You save $40,910 in interest
• You pay off your mortgage 3 years earlier

2. Increase your regular payments

A little extra can go a long way when it comes to paying off your mortgage faster. Even a small increase to monthly payments, like rounding up from $2,630 to $2,700, can make a huge difference, with more going towards reducing your mortgage principal and therefore your interest charges.

Result

With a $70 increase to monthly payments:

• You save $14,113 in interest
• You pay off your mortgage 1 year, 1 month earlier

3. Make a lump-sum payment

An inheritance, a tax refund, a bonus – it can be tempting to treat yourself with this extra cash. But, just like with increased payments, putting these lump-sums towards your mortgage will give back more than you put in over the long-term. Even a single $2,000 payment will reduce your principal, save you interest and help you reach mortgage freedom much faster.

Result

With one $2,000 lump-sum payment:

• You save $3,356 in interest
• You pay off your mortgage 2 months earlier

Where do you go from here?

Before you get started with these strategies, just make sure you talk to your mortgage advisor. Some important considerations to chat about include:

• Mortgage anniversary date - For most mortgages, this date is your opportunity to make an additional payment.
• Term status – Generally, you can explore switching to an accelerated biweekly payment or increasing your payment amount altogether following the first year of your mortgage term.
• Mortgage type – This will determine what you can do and when for paying down your mortgage.

3 ways to increase your home’s value

Once you buy a home, it becomes one of your biggest assets. Maximizing its value has many benefits, boosting your net worth and bank balance if you ever choose to sell. Although home values are high right now, it can still be worth exploring options to increase yours further:

1. Add your square footage

The size of your home can dramatically raise its market value. But you don’t have to build an extension to increase space. Opening up your floor plan by bringing down a wall, refurbishing an unused basement or even installing a deck in the garden can add the square footage you need.

2. Maximize your energy-efficient features

Having an energy-efficient home doesn’t just boost its value, it also reduces your utility bill and protects the environment. Planning on adding things like Energy Star-rated windows, LED lighting or better insulation? Remember to take advantage of rebates that could apply to your eco upgrades. Click here for some rebate options.

3. Out with the old…

There are several things that immediately date a home. They include old carpets and popcorn ceilings, but also laminate or tile countertops, wood paneling and vertical blinds. The good news is that all these things can be replaced fairly easily. Updating them now means less work for a future owner—and that’ll make your house more appealing when it comes time to list it. Don’t know what’s on trend? Head to the library and look at the latest interior design magazines for some inspiration.

At the end of the day though, the best thing you can do to keep your home value high is to stay on top of regular maintenance. A leaky tap, peeling paint, missing roof shingle can all create bigger issues over time.

You put a lot into your home – money, time, care. Optimizing your mortgage, while maximizing your property value, will ensure it gives back as much to you. A great way to do that is by chatting with your mortgage advisor. As the local experts on everything homes and mortgages, they can give personalized advice on how to make your home work harder for you.