By Devon Ethier, CFP®, MBA, Investment Advisor
A mortgage is often the largest debt that families carry and paying it off early can be a significant milestone on your journey to financial freedom. In this article, we'll explore strategies for early mortgage payoff that can help you achieve a debt-free future and pave the path to financial independence.
1. Make Extra Payments
a. Biweekly Payments:
Instead of making monthly payments, consider making half of your monthly mortgage payment every two weeks. Over the course of a year, this results in one extra monthly payment, helping you pay off your mortgage faster.
b. Round-Up Payments:
Round up your monthly mortgage payment to the nearest hundred dollars or another convenient amount. The extra dollars may seem small individually, but they add up over time and can shave years off your mortgage.
2. Make Lump-Sum Payments
a. Tax Refunds:
Use tax refunds, annual bonuses, or any windfall income to make lump-sum payments toward your mortgage principal. These one-time injections of cash can significantly reduce your overall mortgage balance.
b. Inheritance or Gifts:
If you receive an inheritance or a substantial gift, consider using a portion of it to pay down your mortgage. Be sure to check any tax implications related to large gifts or inheritances.
3. Make Additional Principal-Only Payments
Inquire with your lender about making additional payments that are applied directly to your mortgage principal. These payments reduce the outstanding balance and, over time, decrease the interest you pay.
4. Round Up Your Payments
Rounding up your monthly mortgage payments to the nearest hundred dollars or even to the next full hundred can accelerate your mortgage payoff without straining your budget.
5. Allocate Windfalls
Use any unexpected windfalls, such as tax refunds, work bonuses, or gifts, to make extra mortgage payments. This can significantly reduce your principal balance.
6. Increase Your Monthly Payments
If your financial situation improves, consider increasing your monthly mortgage payments. Even a small increase can make a big difference in the long run.
7. Consider a Mortgage Recast
A mortgage recast involves making a large lump-sum payment toward your mortgage principal and then having your lender reamortize the loan. This reduces your monthly payments while keeping the original loan term intact.
8. Explore Loan Programs
Investigate mortgage programs that offer incentives for early payoff, such as the ability to make extra payments or lower interest rates for shorter-term loans.
9. Consult a Financial Advisor
Consider consulting a financial advisor or mortgage specialist to help you develop a personalized mortgage payoff plan that aligns with your financial goals and circumstances.
Paying off your mortgage early is a significant financial accomplishment that can free up your budget, reduce financial stress, and pave the path to financial freedom. By implementing these strategies and staying committed to your goal, you can achieve the peace of mind and financial independence that come with a mortgage-free life.
If you would like to know more about how you might be able to pay down your mortgage faster, we are here to help. Call us today or Book here.
Devon Ethier, CIM®, CFP®, MBA, Investment Advisor with iA Private Wealth, and Insurance Advisor* with Oceanside Wealth Management Ltd., can be reached at the iA Private Wealth office at 166 E. Island Hwy Parksville, BC by phone at 250-586-1332, by email at firstname.lastname@example.org, or online at www.carolplaisier.com.
iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and a business name under which iA Private Wealth Inc. operates.
This is not an official website or publication of iA Private Wealth and the information and opinions contained herein do not necessarily reflect the opinion of iA Private Wealth. The particulars contained on this website were obtained from various sources that are believed to be reliable, but no representation or warranty, express or implied, is made by iA Private Wealth, its affiliates, employees, agents or any other person as to its accuracy, completeness or correctness. Furthermore, this website is provided for information purposes only and is not construed as an offer or solicitation for the sale or purchase of securities. The information contained herein may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces where they are registered.
*Devon Ethier provides insurance products through Oceanside Wealth Management Ltd. Only products and services offered through iA Private Wealth Inc. are covered by the Canadian Investor Protection Fund.