Title:
Fast-Tracking to
"Mortgage Free"
Word Count:
565
Summary:
Ever thought
about purchasing a property for recreational use but thought the financing
would be too hard to obtain? Discover how that property could be closer than
you think!
Keywords:
recreational
properties,buying cottages, financing cottages, buying second homes,financing
second homes,investment properties,purchasing investment properties,financing
investment properties,buying cottages
Article Body:
Copyright 2006
Donna Lewczuk
Just imagine – as you’re going through your favourite coffee drive-thru this
week – that a well-dressed gentleman stops and offers you $11,000 for your
medium double double. Who would hesitate? We’d take the cash. It’s not so far-fetched. In fact, if you
take that coffee budget and apply it to your monthly mortgage payment, a mere
$30 extra per month –you could save yourself about $11,000 over the life of
your mortgage.
Strategies for knocking years off your mortgage
Most of us can accept the idea that we must borrow money to purchase a home. We
look for the best mortgage, and then just keep doling out the money for as long
as it takes to pay it off. Most Canadians choose to amortize their mortgage
over 25 years. That’s a long financial commitment, and it could more than
double the cost of your home. But with good planning – and a few smart tactics
– you should be able to enjoy your mortgage-burning party much earlier. Here
are a few strategies for fast-tracking your mortgage:
1. Increase your monthly payments. Rather than choosing your amortization
period first, ask yourself how much you can afford each month. For example, you
may feel that you can afford $1,000 per month. You’re delighted when your
$125,000 mortgage only demands an $800/month payment (at a 6% interest). But
make a monthly payment of $1,000 instead, and you’ll shave 8.75 years and
almost $46,000 off your total interest cost.
2. Take advantage of lower rates. In addition to reducing the overall interest
component of your mortgage, you can take the opportunity to pay down more
principal faster – simply by maintaining your original payment. You should even
increase your payment if you can, to reap the benefits of some of the cheapest
mortgage money in memory. Again, you could take years – and thousands of
dollars off your mortgage.
3. Tie mortgage payments to your pay schedule. Many Canadians are paid on a
bi-weekly schedule. If you accelerate your payments to bi-weekly instead of
monthly, you could improve your own cash flow and fit in an extra payment each
year. That means that you’re paying off principal faster – leaving you with
less interest to pay overall. It doesn’t seem like much but – like putting your
coffee budget to work – the bi-weekly strategy can have you mortgage free four
years sooner, with almost $22,000 in savings.
4. Use any bonuses, tax refunds or “found money” to pay down principal. This is
especially valuable in the early years of your mortgage. If you receive an
annual bonus or other lump-sum compensation, see if you can put it against the
principal. An extra $1,000 per year is a great way to fast-track to
mortgage-free!
5. Consolidate your loans into a new mortgage and use the savings to boost your
payments. If you’re a homeowner with some equity, you can use your mortgage to
consolidate your other loans: student loans, car loans, etc. Add the money
you’ve been spending on loan payments to your mortgage payments, and you could
see big savings in overall interest.
With mortgage rates still low, you should take the opportunity to get an expert
mortgage analysis from an independent mortgage broker with access to mortgages
from a wide spectrum of lenders. You’ve
got a great opportunity to put some fast-track tactics in place. You’ll
remember what a good decision you made at your mortgage-burning party.