Buying a home is most likely the single largest purchase you will ever make in your life. And unless you’re independently wealthy, a mortgage is likely how that purchase is going to be possible. And while it can seem hard to comprehend paying off something so expensive, for so long (we’re talking decades here!), there are a few ways that you can make paying off your mortgage seem like less of a life sentence and more of a life goal.
1. Pay more up front
If you’re able to put more money down up front, you might be able to opt for a shorter amortization period. Making a bigger down payment means you have more money toward the principal amount of your mortgage, which means your monthly payment on a standard 25-year mortgage might be less. If you’re able to, opting for a shorter amortization period will raise your monthly payment, but depending on how much you were able to put down, it could work in your favour.
2. Make bigger payments
If possible, talk to your financial institution to see if you’re able to increase your mortgage payments beyond the minimum. You may have to make some financial decisions — like no vacations for a few years, or opting for a used car instead of the latest model — but your future mortgage-free self will thank you! You’ll also pay less interest because those extra dollars will go toward paying the principal amount quicker.
3. Pay more often
If you’re able to make accelerated payments, you can shave years off the life of your mortgage and save on interest, too. With a bi-weekly accelerated payment, your mortgage payment is divided in two and that amount is withdrawn every two weeks. You’ll still make 26 payments per year, but it works out to be a little more each payment than with a standard bi-weekly payment. Same thing if you want to do weekly accelerated payments — your monthly payment is divided by four and you’ll still make 52 payments, it’ll just be for a little extra.
4. Top it off
Most mortgages allow you to make lump-sum payments up to a certain amount without penalty. An unexpected tax return, office holiday bonus or other financial windfalls could be put toward paying off your mortgage. Make sure you talk to your financial expert to understand what lump-sum payment options your mortgage allows.
5. Plan ahead
When shopping for mortgages, consider if you can afford making larger payments over a shorter amortization period — that’s the total length of time it takes to pay off your mortgage. The longer the amortization period, the more interest you’ll owe on your mortgage. You could save thousands in interest by choosing a shorter amortization period.
While it can be tempting to put everything you have toward paying off your mortgage quicker, don’t forget about things like retirement savings and emergency funds. Ultimately, it’s all about balance — your mortgage is just one piece of your financial life.
It’s also important to avoid being house poor by having an honest look at your lifestyle and how you can maintain a social life and savings account along with a mortgage. Maybe, that means buying a smaller starter home or renting out an extra bedroom to help you make your payments.
