You need to have a plan and the knowledge to find mortgage financial freedom sooner than later.
****IMAGINE: If you bumped your mortgage payment 10% every year from the start, you would be mortgage free in 13 years Wow – Here are more secrets your bank does not want you to know.
- DOUBLE UP ON YOUR MORTGAGE PAYMENT: Doing this once a year can cut 4 years off the mortgage.
- USE THE FREQUENCY OF PAYMENT INCREASE OPTION: Going from monthly to bi-weekly accelerated payments can cut over 3 years off your mortgage. At $2000 per month, three years of no payments is worth $72000.
- MAKE MORE THEN THE NORMAL PAYMENT OPTION: A onetime 10% increase can cut four years off the mortgage, depending on your current mortgage balance.Imagine if you bumped the payment 10% each and every year, you would be mortgage free in 13 years from start to finish. Even at 5 % there is savings, you would be mortgage free in 18 years. Another way is to consider increasing the payment by the amount of your annual raise?
- MAKE LUMP SUM PAYMENTS WHEN YOU CAN: This is the same idea; the mortgage is gone way faster. Even just one extra payment a year is equal to one monthly payment. Possibly consider using your annual work bonus?
- WHEN RATES DROP TRY TO RENOGIATE A NEW RATE: Depending on any cost from your lender this is generally a clever idea. A 1% reduction on a $300000 mortgage will save you $250 a month multiply this by 5 years that is $15000. What a savings.
- KEEP YOUR CREDIT RATING HIGH: Make your pay ALL your bills on time. Never let payments slip past their due dates as this will affect the mortgage rate you get quoted to you. Always keep balances low in relation to credit limits on credit cards, lines of credit, loans, etc. 60% or less is best even if you the balances in full every month. It’s generally your statement balance each month that gets reported to the credit bureau. So, if your credit limit is say $5000 and you are running $5000 a month through the card each month (to collect points or so-called freebees) and paying in full, it will look like you are maxing out your credit limit and your credit score will drop accordingly.
- ADD UP ON YOUR MORTGAGE: This does sound backwards indeed. Use this to payoff credit card debt, line of credit, car loan, any recreational vehicle loans, and so on for a better rate and a set payment plan. But you are thinking you do not want to extend the repayment period of that stuff by rolling it into your mortgage? Then another way is to keep the total payment amount the same but pay it in one monthly payment to the increased mortgage.
- USE AN RRSP CONTRIBUTION TO YOUR ADVANTAGE: Use your income tax refund to pay down your mortgage.
- MIGHT CONSIDER CHANGING TO A VARIABLE MORTGAGE RATE: This is a clever idea to consider, but keep your mortgage payments the same as if on a fixed rate. Variable rate mortgages usually win out over fixed rates. By paying more than is required, you will pay off the mortgage faster. It is also a buffer in case the rate rises above the fixed rate for short periods of time. But have Caution – Variable rate mortgages are not for everyone. Discuss this option closely with a mortgage broker professional.
- MOVE YOUR CURRENT MORTGAGE WHEN YOU MOVE: When you move to your next property, switch your old mortgage to the new property to avoid penalty higher rate on a new mortgage. They call this action” porting”. You need to ensure that your mortgage has this feature. It is not widely known and could save you a ton of money in the long run.
- SET UP AUTOMATIC SAVINGS: Another thing you can do along with LUMP SUMM PAYMENTS is set aside $10 off every paycheque and when it reaches the amount of one mortgage payment then apply it to the mortgage.
- UNLOCK FROM THE MONEY DRIP: Try to avoid paying for items with the fancy points credit or debit card. These make it way too easy to overspend; just decide to go old school and pay with cash. Sometimes you get an even better deal when done with cash. It does work, just try it.
- THE LAYAWAY PLAN OPTION IS ONE TO STAY AWAY FROM: Surprised this still happens; but in cases where you see this do not take the offer. Those 6 months don’t pay schemes’, once they have you it is hard to just pay it off, they will entice you go on a monthly payment plan. So, try to avoid this.
- TOO MUCH HOME, THEN CONSIDER DOWNSIZING YOUR HOME: We know 2 family friends and clients of mine they had a 5-bedroom home for 2 adults and 1 child. They did not need such a big home. Once they got rid of the big home they do not use they were much better as they are nearly debt free now.
- USE UNUSED SPACED TO YOUR ADVANTAGE: Don’t want to move, but have a wasted basement…well rent it out! Use this income to paydown your debt. It is that simple.
- USE A PLAN TO BE ABLE TO MAKE YOUR MORTGAGE TAX-DEDUCTIBLE: If you are self-employed, own rental property or have investments; this is possible. What you must do is structure your finances in way to use every possible home write offs as possible. This easily can be discussed once we go over your current situation.
- HAVE A PAYMENT PRIORITY: Define your various debts by category.
- THE DEBT WITH THE HIGHEST INTEREST RATES SHOULD BE PAID OFF FIRST. This is a must!
- TAX DEDUCTIBLE LOANS SHOULD BE PAID OFF LAST: Pay the non-tax-deductible loans first and fastest. Pay the tax-deductible ones the slowest and last.
- ATTACK THE SCARIEST DEBT FIRST: Credit Cards with high interest rates.; they are the scariest ones!
- PAYOFF THE BAD NEXT: Car loans and boat loans are examples here. Items which depreciate.
- THE NOT SO BAD SHOULD BE PAID OFF LAST: Examples such as mortgages, investment loans, and stuff. The debt for assets that should appreciate is the least harmful to your net worth.
- NEW CAR: If you must finance it, do not lease it. The only exception is if you are self-employed; then leasing makes more sense.
- USE THE SECRET CASH UNDER THE MATRESS: If you have $35000 hidden away in a bank account for a rainy day or a secret vault in your home and $25000 owing on a line of credit. This you need to think about? pay the debt off! The bank account is paying you next to nothing interest or if you have it home in a secret vault earning no interest (which is also taxable income) and the line of credit rate is high (and not tax deductible). It is obvious what you should do now. Still keep the line of credit but try not to use it.
******* BE CAREFUL OF THOSE ULTRA MORTGAGE OFFERS********
Watch out for those awesome and ultra-low mortgage rates. These are called “no-frills” mortgages and are often loaded with tons of restrictions like pre-payment limitations, fully closed terms, many features removed, or weird penalties. You must compare the products offered to you and what your present and future goals are. If you do not consider what is being given up, you will realize the mistake you did by choosing a so-called excellent rate. This might restrict you taking advantages of many options I have pointed out above. Do you really think it is worth it? Is the mortgage professional you are working with giving you the right advice if he does not tell you everything?
***** When you are looking to SELL-BUY-FINANCE your real estate then deal with a real estate professional who has been working in real estate for over 10 years and can sit down and go over the right plan of action for your real esate success. Go to Real Estate Financing Help for more information or I can be contacted by email with any question by clicking: Real Estate Question or CELL/TEXT: 905-903-0012.