In order to be mortgage free faster it is completely up to you to take the steps necessary to accelerate your payments. You can’t just wait until your lucky six numbers come up in the lotto. Paying off your mortgage sooner is all about strategy and automation.
Here are our three favorite ways to cut your mortgage down to size.
Increase your payments
Our favorite way by far to pay off your mortgage faster is by increasing your payments. In fact, we personally practice what we preach, having cut our own mortgage down from 30 years to 14 years by increasing our payment by a very small 15% per year over the last three years.
Increasing payments works because it generally goes unnoticed in the monthly budget and is automatic. Once the payment increases are set up, they take care of themselves.
Further, you can increase your payments by as little as $50 a month, or you can increase your payment by as much as 20% depending on the lender. In some cases you can even go as far as doubling your payment on an ongoing basis.
Double up your payments
Some lenders offer a double up payment option. The concept is quite simple – anytime you want to make an extra payment that is equal to your current payment you can. Our clients love this feature, and it is most often the deciding factor when it comes to selecting a lender.
If you take advantage of the double up option on every payment, a 25 year mortgage will be paid off in 10 years. Use it for every second payment, and mortgage freedom day comes just prior to the 15th year. If you want to edge towards the slightly less insane side of mortgage pre-payment, using this feature a mere twice a year will knock five years off of your amortization.
If the concept of doubling your monthly payment seems daunting, we recommend choosing weekly payments. Weekly payments are smaller and as a result easier to double up, furthermore they accelerate your amortization as well.
Special occasion lump sum payments
Many of our clients know that they should make lump sum payments on their mortgage, but never seem to get around to it. What we suggest, is pre-selecting a date or two every year where you will make an extra payment on your mortgage. Examples of dates some of our clients have selected are anniversaries, birthdays, children’s birthdays, Thanksgiving and Christmas.
The amount of the lump sum payments doesn’t have to be extravagant either. Most lenders will allow lump sum payments as small as $100. The amount doesn’t matter, just do what you can afford and mortgage freedom day will come much sooner.
