A mortgage is most probably one of the biggest financial debts you have ever had, compared to other things. Buying your house can be especially exciting and promising for your future, but at the same time, it contains a lot of stress over the financial aspects of it. You have to be mature and responsible for the decisions you make, on how are you going to pay the mortgage and become debt-free. For this, you might also consider ways you can save money so that the overall process will be faster and more financially efficient.
Below are the ways you can save money and become debt-free easier and faster. Let’s have a more thorough look at them.
According to the Mortgage Professionals Canada’s annual report in 2015, 36% of homeowners took action to reduce mortgage debts and the good news in this is that there are specific ways you can do the same and achieve success.
A simple way of doing this could make a lump-sum. But there are, of course, some other ways that will make a financial difference in your mortgage which include:
- Renegotiating for a lower interest rate
- Switching to accelerated weekly or bi-weekly payments Increasing your regular payment
- Lump-sum payments.
DID YOU KNOW?: Increasing your payment by just $20 a month can have a considerable impact. The reason is that the extra money is applied directly against the mortgage principal decreasing the amount of interest you will pay over the life of the loan.
You must prioritize:
Savings for a home can be one of the most important priorities in your life. So, it is worth asking yourself questions like, do I go out to eat all the time, do I take expensive vacations, buy all the latest stuff and more. Or am I willing to tighten up my belt and save more money for higher priorities such as paying off my loan? It is up to you to decide which ones are more important to you personally. But if the mortgage gains the higher places in your list, you seriously have to reconsider cutting off other less important expenses and concentrate more on paying off your loan.
Review and if possible refinance your loan:
You have to keep track of the interest rates on your loan at least once a year and if there are some good opportunities refinance your existing loan with a lower interest rate, that will help you to save a lot in the long run. Rates change, and it is possible for the banks to change their deals as well, so be open to consider and negotiate for refinancing for a better loan with a lower interest rate.
Other tips may include:
Annual or periodic lump sum payments: Doing a lump sum payments of 10% to 25% of the original principal amount each year may be a good choice. It may sound straightforward, but you should simply increase your payments and as a result decrease the time you will be paying for a mortgage.
Double your payments: Some lenders also offer the option of doubling all payments.
Accelerated payments: With a weekly or bi-weekly payment option you may switch to an accelerated payment. This on its turn means that you apply a small incremental amount of money directly to the principal. This payment is designed so that every 12 months you make the equivalent of 13 payments.