While no one can prepay their mortgage up front (and if you could, what would the point of getting a private mortgage be?), but figuring out how to pay it down quickly and pay it off early is a skill you’ll need to master from the start of your mortgage. The longer it takes you to pay off your mortgage the more interest you pay, and the more interest you pay the more the lender makes. If you want to get the best deal, just ask any of our Canada mortgage brokers: they’ll tell you that paying off your mortgage means big savings.
Can You Afford to Prepay?
The first thing you need to ask yourself is can you afford to prepay your mortgage? Maybe you’re taking the 25 year option because you really, really need lower payments. Not everyone can pay off their mortgage early; since a private mortgage (or any mortgage) can be the largest debt we face in our lifetimes, it’s important to be honest and upfront with yourself about how much you can afford to pay.
What’s Your Interest Rate?
Now you need to figure out your interest rate on your mortgage and how much you have left on the balance. You’ll usually find this on your statement, but if you can’t you can call your lender and find out.
Check Out How Much You’re Paying
You can find hundreds of mortgage calculators just by searching for them on Google.
From here you’ll be able to calculate how much and how long it’ll take to pay off your home at the current rate. This way you’ll know how much you can up your payment and how long it’ll take after you change your situation.
How Much More Are You Going to Pay?
Now you have to figure out how much more you can realistically pay.
You can choose to pay a percentage of your monthly income extra, usually $100-$200 on top of your monthly payment. It might not seem like much but over time it can really add up. Once you pay off another debt you can snowball that amount on top of your private mortgage payment each month, paying it off faster.
If you get a raise, you can pop the entire amount into your mortgage instead of buying yourself something pretty. If you do this your monthly payment will drop drastically, but you’re going to want to keep paying the amount you paid before. This way you’ve not only cut out a big chunk of what you’ll have to pay in the future, but you’re just that much closer to paying off your mortgage.
It can be hard to figure out how to pay it off early, but working with us as your Toronto mortgage broker means you get help to set up a payment plan to get things paid off in no time. Give us a call today and see what we can do for you.