When you start putting money towards the biggest debt you'll probably ever have you can save thousands of dollars in interest and end up mortgage-free many years sooner. According to a recent survey by CIBC, however, only 55% of the homeowners surveyed had taken any type of action to pay down their mortgage faster since purchasing their homes. Many simply don't have the extra money to make more payments due to financial circumstances. Others just haven't realized exactly how much money they can save by paying off the mortgage faster - even with small chunks of money.
Here are the best ways to put more money into your home loan at a faster rate so that it can be paid off as soon as possible:
1. Increase your payment amounts
By adding an extra $100 per month to your regular mortgage payment, you could save more than $10,000 in interest charges over the mortgage term. This would be the case for a 25-year, $250,000 mortgage with a 3.49% interest rate. As an added bonus, your mortgage would be paid off years sooner.
2. Choose a faster payment option
Instead of making your mortgage payment monthly, consider taking out a biweekly payment instead. This will add up to 2 extra payments made every year and you could save more than $16,000 in interest payments for the same house listed above. The home loan would be paid off in approximately 22 years instead of 25.
3. Make lump-sum payments
Check the term of your mortgage to make sure that you can pay off some of the principal yearly without having to incur a penalty. Even if you only have a couple of hundred dollars that you can pay once in a while, it can make a huge difference when it comes to savings.
The best way to find out just how much money you can save by paying off your mortgage earlier is to use a mortgage calculator. You'll have to make sure that you're using a Canadian one though since calculations are different for American mortgages. You can find a calculator here on this site.