10 tips to become mortgage free fast

I am increasingly faced with clients who are intent on becoming mortgage free as quickly as possible. While most mortgages today are amortized over 25 years, here are some tips to break free of that financial ball and chain faster!

10 tips to become mortgage free:

1. Never get an open mortgage at a fixed rate unless you plan on paying it off within its term.Today’s closed mortgages generally offer 10 to 20 per cent prepayment privileges, and can usually be obtained at one per cent or more off the posted rate. Open mortgages at fixed rates carry higher interest. Why pay higher interest unless you are going to exceed this 10- to 20-per-cent prepayment? You can always make bigger lump sum payments at renewal time with no penalty.
2. Use accelerated weekly or bi-weekly payments to make yourself mortgage free faster.Accelerated weekly payments are equivalent to one-quarter of your monthly payment. Accelerated bi-weekly payments are equivalent to half your monthly payment. Both of these methods enable you to make one extra monthly payment a year. The impact of this alone reduces your amortization from 25 to less than 21 years.
3. Give your mortgage the same raise that you get each year.If your income goes up 10 per cent, so should your mortgage payment. This extra increase in payment will go directly toward principal repayment.
4. Give your mortgage a portion of any bonus or extra income.If you spend 30 per cent of your income on your mortgage, then 30 per cent of any extra income should also go to your mortgage in the form of a prepayment. This bonus portion will go straight toward principal repayment.
5. Keep your payments the same, even if you renew at a lower rate.Since you know you can afford to pay at this level, don’t decrease your payment when you negotiate a lower rate. The difference in payments between your new rate and the old rate will go directly toward principal.
6. Use your income tax return to put a lump sum payment towards your mortgage.This is extra money that is not accounted for in your monthly budget. Rather than indulging, put it to good use and make yourself mortgage free faster.
7. Put extra money from your budge toward your mortgage.Most financially sound people have a budget that they live by. If you have a little bit extra then apply it to your mortgage. Minimum prepayments can be as little as $100.
8. Round up your mortgage payments.Why not round off that $656 bi-weekly to $660, or $675? You will be amazed at the difference.
9. Consider a variable rate mortgage.While the fluctuation will keep some people awake at night, those who can endure the rate adjustments can save money. Some variable rate, or adjustable rate mortgages are up to 0.5 per cent below prime.
10. Seek independent financial advice.While some bankers do look out for your best interest, they work for the bank, not you. Their branch, organization and shareholders all have a financial interest in lending at higher rates, and it is in their best interest for you to keep your mortgage for a long time. Talk to your financial planner, mortgage consultant, or talk to a financially savvy friend.

I know that these steps take discipline and dedication, but the old adage still holds true – a penny saved is a penny earned! The one thing that most financially successful people have in common is discipline. It might not feel fulfilling now, but believe me when I say that this short-term sacrifice will result in long-term gain. Just think of what you can buy when you are mortgage free!