Mortgage busters

Get mortgage-free faster

It’s a race against the clock. Make that the calendar. From the moment we sign on the dotted line, many of us spend a lot of time thinking about how to get rid of that mortgage.

There’s a reason why we’re so anxious. On a $100,000 mortgage at seven per cent amortized over 25 years, you’ll pay more than $110,000 in interest. That’s in after-tax dollars. In gross terms—and I mean that in every way possible—your mortgage can actually more than double the cost of your home. And unlike our U.S. cousins, who get to deduct their mortgage interest on their tax return, we’re stuck paying tax on every penny, which makes our mortgages very, very expensive.

Want to burn through your mortgage faster? Your best bet is to pay more now to save big later on. Here are some easy ways to fast-track your payments and save money:

Go biweekly

If you use the accelerated weekly or bi-weekly payment options available through most lenders, you end up making one extra monthly payment a year. This means more of the principal is repaid sooner, leaving you with less interest to pay in the long run. What does that mean in real money? Well, on your $100,000 mortgage at seven per cent, that one extra payment a year will save you almost $24,000 in interest and have you celebrating in about 20 years instead of 25. And since that extra payment is spread over the whole year, your cash flow never feels pinched.

Prepay and save big

To make the biggest impact, particularly in the early years, you can pre-pay your mortgage. Some policies even have a “double up” feature that lets you put extra money against your principal. Put an extra one-time payment of $1,000 against your mortgage and, over the life of your $100,000 mortgage, you can save more than $4,100 in interest. Do it every year and you’re in the money to the tune of about $28,000. So, where do you find an extra $1,000 a year? Take a gander at Easy money.

Negotiate a lower rate

So, you’ve negotiated an interest rate two per cent lower than your last mortgage. Now, instead of having to ante up $700 a month, you’re only on the hook for about $585. Instead of reallocating that to restaurant meals, why not keep humming along with the same payment? That additional $115 every month can save you $23,000 in interest on your five per cent mortgage and gets you mortgage-free almost seven years sooner. Now, that’s smart!

With a little foresight, fast-tracking your mortgage can be relatively painless. So, start planning your mortgage-burning party now!

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