Hello Friends!

Looking to pay off your mortgage faster?

It’s not just about owning your home outright; it’s about gaining financial security and freedom.

With careful planning and dedication, you can accelerate the process, save thousands of dollars and achieve this milestone sooner than you might think.

My husband and I decided to pay off our home in 5 short years. We had paid everything else off that we owned and thought, well… WHY THE HELL NOT!

We were definitely young and energetic. And in some weird way we got a thrill out of watching the principal amount on our mortgage drop each month.

Our friends thought we were absolutely crazy, but we wanted the financial freedom so bad… and the ability to start a family without being tied down by the daily grind of our conventional jobs. I also wanted to clarify that we did not come from a wealthy background. My husband was raised in a trailer park, and my parents were not financially well-off either.

In this post I’ll share with you tips and everything I know and learned along the way when my husband and I were trying to pay off our mortgage faster. 

So if you’re really thinking about doing this, I’m super excited for you! Check out some of the BENEFITS BELOW…

1. Benefits of Paying Off Your Mortgage Faster:

Save money on interest

By paying off your mortgage faster, you will reduce the amount of interest you pay over the life of the loan. This can save you thousands of dollars in the long run.

Build equity faster

Paying off your mortgage faster means you will build equity in your home at a quicker rate. This can be beneficial if you ever need to tap into that equity for things like home improvements, emergencies, or other financial needs.

Reduce financial stress

Being mortgage-free can provide peace of mind and reduce financial stress. You won‘t have to worry about making monthly mortgage payments or the possibility of foreclosure if you fall behind.

Increase cash flow

Once your mortgage is paid off, you will have extra cash flow each month that can be used for other financial goals, such as saving for retirement, investing, or paying off other debts.

Achieve financial freedom sooner

Paying off your mortgage faster can help you achieve financial freedom sooner, allowing you to retire earlier, travel more, or pursue other interests without the burden of a monthly mortgage payment.

2. 4 Effective Ways to Pay Off Your Mortgage Faster:

Make LUMP SUM Payments

One of the most effective ways to pay off your house early is to make extra payments or ‘LUMP SUM PAYMENTS’ whenever you can.

This can be done by making additional payments throughout the year.

Even small additional payments can make a BIG difference. 

The more often you make additional payments to your mortgage, the quicker it reduces the overall interest you pay over the life of the loan.

IMPORTANT NOTE:

Many mortgages allow you to make lump sum payments throughout the year. Some may be weekly, monthly or yearly.

Double check with your lender and go over the terms of your specific mortgage agreement to see if this is an option for you. 

Some mortgages may have restrictions, limits or fees for making lump sum payments, so it’s a good idea to check and confirm with your lender before making any additional payments.

Increase the FREQUENCY of Your Mortgage Payments

By increasing the FREQUENCY of your mortgage payments, you can significantly shorten the length of your loan. You can change your payments to accelerated weekly, weekly, accelerated biweekly, biweekly, semi-monthly or monthly.

The more frequently you make payments on your mortgage, the faster you can reduce the principal balance and interest.

On average, making biweekly payments can shorten a 30-year mortgage by 4-5 years. 

However, the exact amount that your mortgage will be shortened will depend on the interest rate, loan amount, and terms of your specific mortgage. It is recommended to use a mortgage calculator to determine the exact impact of biweekly payments on your loan term.

Increase the AMOUNT You Pay on Your Mortgage Payments

By increasing the AMOUNT you pay on your mortgage payments, you can also reduce the overall length of the loan and save thousands in interest payments.

Consider a SHORTER TERM or ‘Amortization Period’

Consider SHORTENING THE TERM of your mortgage. This can also help you pay off your mortgage quicker and save money on interest payments.

We started making additional LUMP SUM payments on our mortgage every month, and when it was time to renew, we decided to increase the AMOUNT as well. Our mortgage payments were already set at a rapid biweekly frequency, meaning we made two extra payments each year. This helped us reduce our amortization period and the amount of interest we paid.

We kept making lump sum payments every month when we had extra cash. In the end, we were able to double the amount of our payments with these changes.

3. How to Pay Off Your Mortgage Faster: A Step-by-Step Guide

1. Create a Budget – How much extra can you afford to put towards your mortgage each month?

Always start by creating a budget if you don’t have one, you can download my 50/30/20 MONTHLY BUDGET here.

You’ll want to take a close look at your finances by creating a budget that allows you to allocate more money towards your mortgage payments. 

Cut out unnecessary expenses. Try lowering any fixed expenses and redirect all of that money towards paying off your mortgage faster.

Having a budget will help you visualize how much extra money you can potentially save by the end of each month after all your expenses. 

Having a budget should be your first priority, otherwise you won’t even know how much extra you could save at the end of each month.

2. Contact Your Lender – Ask about these 4 options…

How often can you make LUMP SUM payments and how much?

Whether you can increase the FREQUENCY of your mortgage payments without refinancing?

Whether you can increase the AMOUNT of your mortgage payments without refinancing?

And lastly, consider refinancing. To be able to shorten the LENGTH of your mortgage or amortization period, you would need to refinance your mortgage. If you currently have a low interest rate, the first three options may be best until your mortgage comes up for renewal.

ADDITIONAL TIPS FOR REFINANCING YOUR MORTGAGE:

• You will need to know what your current credit score is. Mortgage lenders prefer it to be between 500-650.
• Your debt-to-income ratio should be less than 36%, but some mortgage lenders will allow up to 42%.
• You will want to look for the lowest interest rate with the shortest term to pay off your mortgage faster.
• If you’re refinancing before the term of the mortgage is finished, you will owe a penalty fee. See Rate Hubs mortgage penalty calculator to determine how much you will have to pay.
• You will owe a discharge fee of a few hundred dollars IF you are switching lenders.
• There will be a mortgage registration fee, about another $100.
• Sometimes an appraisal fee, to determine how much your home is worth, which is around $300-$500.
• And sometimes lawyers fees, but it depends whether you use a lawyer or mortgage broker to facilitate the financial transaction. Often the new lender will pay the legal fees. If not, it could cost you about $1000.
• Consult a mortgage broker to navigate the complexities of refinancing. They can negotiate better terms and find the most suitable options tailored to your financial situation.

We have refinanced several times for many reasons, such as better interest rates or borrowing equity. You NEED to find out all the hidden costs, because they can be astronomical, and I mean completely out to lunch!

I remember being told that breaking one of our current mortgage agreements on an apartment of ours would cost an extra $24,000. Needless to say we stayed until the end of the term and then left that bank for good.

Another time we decided to remortgage our home in order to get a lower interest rate. We went from 3.89% to 1.74%, which was a huge difference. The cost to remortgage was $5,000, but in the end, it was worth it. Over the 5-year period, we ended up saving $24,000.

Here is Rate Hubs mortgage refinance calculator that I like to use to calculate and compare. You can add a custom rate in it as well.

I highly recommend utilizing the services of a mortgage broker. Ever since we started working with a mortgage broker, we have never looked back. They not only save you time and money, but they also secure the lowest rates available to you and negotiate the best terms for your mortgages.

3. Buy What You Can Afford

If you cannot afford the payments on your current home, you may want to look at downsizing to a smaller home you can afford, or if possible rent out a part of your home to help pay for the mortgage.

Same goes for new home buyers, make sure you buy what you can afford.

Use a mortgage qualifier calculator to estimate what your mortgage costs will be. Don’t forget to add in your utility costs; water, hydro, gas, taxes, home insurance, and maintenance costs.

How much house can I afford?

Use the 50/30/20 rule to calculate what you can comfortably afford. Calculate it after taxes, so with your net amount. For example, if you make $3,000/month after taxes are deducted. Your needs would be $1,500, wants would be $900 and savings $600.

50% – NEEDS

30% – WANTS

20% – SAVINGS

NEEDS:

Mortgage or rent, condo fees, utilities (heat, hydro, water), food, transportation, gas, healthcare, basic clothing, and basic phone plan… internet if needed.

WANTS:

Designer clothing, vacations, latest electronic gadgets, subscriptions, eating out at restaurants, luxury vehicles…

SAVINGS:

Retirement planning, emergency fund, down payment for a home or to start a business.

The 50/30/20 rule is a good guideline, but it didn’t quite work for us. We were determined to pay off our mortgage in just 5 years, which was a pretty ambitious goal. We had to get creative with our budgeting – we lived on less than half of our income and put every extra penny towards our mortgage. It was a bit crazy, and at times felt unrealistic, but we were determined. 

Keep in mind, we had around $20,000 in our retirement plan started and $10,000 in an emergency fund. I recommend having that EMERGENCY FUND set-up, in case something unexpected comes up, like job loss, illness, needing car repairs, or facing medical expenses. Even though we might feel invincible when we’re young, life happens when we least expect it.

FOR EXAMPLE…

THE IMPORTANCE OF EMERGENCY FUNDS

Just when we were close to paying off our mortgage early, I got injured at work years ago. You’d think my workplace or WSIB would have helped me get back on my feet, but my employer was quick to let me go. Our emergency fund provided some relief for about a year, but eventually ran out. It was a major blow for us, with my husband working tirelessly to cover our increased mortgage payments. I had never lived so frugally in my entire life – it was true minimalism or going completely cheap-ass broke. 

Although we could have refinanced once again and reduced our payments to a more manageable level, it seemed unlikely that I would be able to return to work due to the pain I was living in. That’s when we made the decision to take a chance and venture into the world of property ownership by becoming landlords.

The moral of the story is to HAVE AN EMERGENCY FUND! Even if all it does is give you time to figure out what you’re going to do next, then it’s done its job.

4. Expand Your Income and Save More

There are many ways to boost your income, such as picking up more shifts, staying an hour later at work, starting a side hustle, freelancing, or simply asking for a raise. The additional money you earn can help you pay off your mortgage faster.

Take a look at your budget and see where you can cut back on all your expenses as well. (Download this simple 50/30/20 MONTHLY BUDGET for FREE). Cutting back on your expenses might mean spending less on things you don’t really need, cooking at home instead of eating out, or finding ways to lower your utility and grocery bills. Use the money you save to pay off your mortgage faster.

See my post on, Do You Waste Money? 112 Things to Give Up NOW

For years, we were very careful with our spending. Whenever I needed to buy something, I always checked out the clearance sections first. I made sure to stick to my list and only bought what was necessary. I kept reminding myself that this frugal mindset was only temporary. See The No-Spend Challenge for more tips.

Use Coupons

I used coupons when the clearance section wasn’t as cheap. For coupons, you can try websites like Websaver, Coupons Canada or Tasty Rewards. I would also check out the Cash Back Monitor to maximize your savings with coupons.

Use Cashback Apps

I used to use Checkout 51 and would receive a check in the mail every few months for around $20. It wasn’t a lot, and sometimes I wasn’t sure if it was worth the effort of scanning receipts. However, I saved about $100 a year. I saw on their website that they now also offer cashback on gas, but it’s only available in the United States for now.

ADDITIONAL TIPS TO ACCELERATE YOUR MORTGAGE PAY OFF

• Utilize Tax Refunds and Bonuses: Redirect unexpected windfalls like tax refunds or work bonuses towards your mortgage. Every extra dollar counts!
• Automate Your Payments: Set up automatic payments to ensure consistency in your extra contributions. It helps in maintaining discipline and avoids missed opportunities to pay down the principal.

5. Avoid Taking on More Debt

To stay on track with paying off your mortgage early, avoid taking on additional debt such as credit card debt or personal loans. Focus on paying down your mortgage as quickly as possible.

6. Stay Focused and Motivated

You will get there as long as you stay focused and motivated.

Remind yourself of the benefits of being mortgage-free, such as financial freedom and peace of mind. Keep track of your progress and celebrate small milestones along the way to your goal.

Remember, paying off your mortgage early requires discipline and sacrifice, but the financial freedom that comes with owning your home outright can be well worth the effort.

And what are some changes you can make in your life to help you gain financial freedom sooner?

Leave a comment below, I would LOVE to hear your stories of how you’re saving or trying to hammer down on paying your mortgage off too!

Thank You Credits: Cover photo by Mikhail Nilov on pexels.

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Ratehub.ca Mortgage Refinance Calculator Ratehub.ca. (n.d.). Mortgage Refinance Calculator. Retrieved May 28, 2024, from https://www.ratehub.ca/mortgage-refinance-calculator

Financial Consumer Agency of Canada. (n.d.). Mortgage Qualifier Tool. Retrieved May 28, 2024, from https://itools-ioutils.fcac-acfc.gc.ca/MQ-HQ/MQ-EAPH-eng.aspx

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Investopedia. (n.d.). 9 Things to Know Before You Refinance Your Mortgage. Retrieved May 28, 2024, from https://www.investopedia.com/mortgage/refinance/9-things-to-know-before-you-refinance-mortgage/#toc-1-your-homes-equity

Rocket Mortgage Canada. (n.d.). Everything You Need to Know About Refinancing. Retrieved May 28, 2024, from https://rocketmortgage.ca/learning-centre/refinance-and-renewal/everything-you-need-to-know-about-refinancing/#:~:text=Generally%2C%20most%20lenders%20require%20a,depend%20on%20a%20few%20factors.

Fidelity Canada. (n.d.). Four Reasons Your Debt-to-Income Ratio Is So Important. Retrieved May 28, 2024, from https://www.fidelity.ca/en/insights/articles/fourreasonsyourdebttoincomeratioissoimportant/#:~:text=Different%20lenders%20have%20different%20criteria,look%20for%20a%20lower%20figure.