Chances are you’re probably not getting the best mortgage advice.
Banks and many mortgage professionals are busy competing on just the lowest rate.
But fail you when it comes to showing you how to reduce your mortgage debt more quickly and save you money on unnecessary interest payments.
Imagine paying 15% less on interest charges plus paying your mortgage debt 3 years sooner (I show you how below).
Paying your mortgage off more quickly is a reality.
How to pay your mortgage quickly
Having to pay interest on your mortgage is something you can’t control. Interest is the price to borrow money.
But how much interest you pay is something that you can control.
The focus is always on the lowest mortgage rates (check out what I say about interest rates in another post). But to pay your mortgage quickly you need to focus on ways to pay less interest… regardless of what interest rate you’re paying.
Less interest paid means more money in your pocket to enjoy life.
How much do you pay in interest for every dollar you borrow?
I won’t bore you with the math (you can email me and I’ll send you the numbers) but given an average interest rate of 4% over the entire life of a 25 year mortgage you’ll end up paying just under $0.60.
Translation… for every $1 you borrow you have to pay back that $1 plus $0.60!
Now do you want to pay less interest on your mortgage?
How to pay less interest on your mortgage
It’s through focusing on accelerating your payments and making pre-payments. That’s not a big secret. But borrowers are not shown often enough how small increases to payments can save them big time in the long run.
Many borrowers get the lowest rate..and then that’s it. There’s no plan. No how-to-guide. No manual.
There’s not enough coaching on how to use the mortgage product to their advantage…and many borrowers are often not shown how to pay off their mortgage more quickly.
Pay 15% less in interest
Bi-weekly accelerated payments help reduce the amount of interest you pay over the life of your mortgage. Using the example of a 4% mortgage over 25 years it lowers the interest expense from $0.60 to $0.50 for every dollar you borrow.
That’s a 15% reduction in interest paid to the lender over 25 years. Plus you get the benefit of paying off your mortgage about 3 years sooner!
A buck a day saves you $6,000 on interest
Your mortgage may feel like an insurmountable mountain of debt.
In the grand scheme of things how much could an extra dollar a day in pre-payment toward your mortgage really make?
That amount seems like a flea’s fart in a hurricane.
But $1 a day or $365 annually will save you over $6,000 in interest over 25 years…and you pay off your mortgage 11 months sooner (assuming a mortgage amount of $300k).
Only 1 in 3 Canadians are actively reducing their mortgage interest
According to Maritz Research Canada’s most recent poll only 32% of Canadian mortgage borrowers are making mortgage pre-payments.
Small is the new big
Of course some borrowers have an extremely tight household budget and can’t afford to pre-pay hundreds of dollars towards their mortgage every month. But any amount helps. Small consistent payments are powerful.
Just like a constantly dripping faucet can fill a bathtub, the accumulation of small amounts of money can amount to significant savings over time.
Leave a comment and tell me what you think. I know this will spark quite the discussion.
Also: do you have a friend who you think would benefit from this article? Send them a link to this post. I’ll appreciate it (as will they).
Want to learn more about why paying your mortgage faster doesn’t end with the interest rate? Read this resource I created about the one thing you need to understand about your mortgage.