What’s the quickest way to pay off your mortgage?
There isn’t 1 “fastest way” to pay off your mortgage. However, there are several things you can do to pay down your mortgage as quickly as possible.
A shorter amortization – amortization period is how long it will take you to pay off your mortgage. Selecting a shorter amortization (i.e., 25 instead of 30 years) will increase your regular payment amount but you’ll be mortgage-free sooner. Select the amortization that lines up with payments you’re comfortable with.
Make payments weekly or biweekly -Making more frequent payments can help shorten your mortgage and reduce the amount of interest you’ll pay.
Pay more than the minimum payment -Increasing your monthly mortgage payment can help you pay less interest and potentially own your home several years sooner.
Make lump-sum payments -Some mortgages have prepayment privileges that allow you to make additional lump-sum payments annually. Receive a bonus from work, a tax refund, or other “found money”? Consider applying it to your mortgage to pay it down faster.
Find the lowest mortgage interest rate -A higher interest rate means you’ll likely end up paying more over the duration of your mortgage and it’ll likely take you longer to pay it down. Check with more than one mortgage provider to get the best rate on the mortgage that fits your situation.
Is a fixed-rate or variable-rate mortgage better for paying down faster?
Because it’s possible for the interest rate on a variable-rate mortgage to go down, and a lower interest rate means more of your payment goes toward paying off your principal, a variable-rate mortgage could help you pay your mortgage down faster. However, you must also be able to deal with financial uncertainty and the possibility that your mortgage rate could go up which means it could take you longer to pay down your mortgage.
If you like knowing your mortgage payment will stay the same, regardless of mortgage rates rising or falling, then a fixed-rate mortgage may be your best choice.
The challenge of paying off your mortgage
To pay off your mortgage faster, you’ll have to make some financial sacrifices. It might mean fewer vacations, restaurant meals, or other perks that make life more enjoyable, but for many, the relief of not having a mortgage is worth the sacrifice.
Should you pay off your mortgage or save and invest?
Most advisors would suggest you try to do both.
For instance, you can use a registered retirement savings plan (RRSP) to save for your retirement, then use the potential tax refund to help pay down your mortgage.
You can also use a tax-free savings account (TFSA) to save for a lump-sum payment on your mortgage.
The above example is for illustrative purposes only. Situations will vary according to specific circumstances.
Now that you understand more about paying off your mortgage faster, you may want to contact your advisor and a credit planning consultant. Tax accountants at Filing Taxes can
If you need any advice on tax-saving strategies from an expert tax accountant in Toronto, Mississauga, Oakville, and Hamilton feel free to reach out to Filing Taxes at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step towards proper management of your finances.
Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.