Not many people actually take the time to calculate how much interest they will have paid at the end of their mortgage term. And yet, if they did the calculation, they would see that, despite historically low interest rates, it is better to repay your mortgage faster instead of making the mortgage lender richer! Here’s how.
INCREASE THE AMOUNT OF YOUR PAYMENTS
This is the most obvious solution for many people. Logically, by paying a little more each month, you will be able to repay your loan faster. However, you must think long term when choosing this option, as it can be difficult to reduce the amount of your payments before the renewal of your mortgage contract. This could be problematic if your finances become tighter…
INCREASE THE FREQUENCY OF YOUR PAYMENTS
Financial institutions offer several repayment options that influence the speed at which you finish repaying your mortgage. You can choose to pay every 2 weeks, thereby making 26 payments per year, instead of 12 payments as part of a monthly payment plan. Even better, you can choose to make weekly payments, which will allow you to pay the equivalent of one more monthly payment per year!
MAINTAIN YOUR PAYMENT AMOUNT, EVEN IF INTEREST RATES DECREASE
At the end of your 4- or 5-year term, take advantage of the fact that your mortgage payments are now well integrated into your budget, by maintaining the same payment amount even if interest rates decrease. Continuing to pay the same amount while mortgage rates drop will enable you to repay your mortgage faster.
MAKE AN ADVANCED PAYMENT
Have you received an inheritance or a bonus at work? You are often allowed to pay up to 10% of the remaining capital on your mortgage each year. Before signing your mortgage or your term renewal, ask your lender some questions. How much can you repay each year without incurring extra costs? Is there a minimum amount that needs to be paid or a particular time of year by which an advanced payment needs to be made? Finally, ensure that you are familiar with all of the conditions surrounding this advanced payment so that you’re not caught off guard.