A recent poll by CIBC revealed that Canadian mortgage owners believe they will be mortgage-free by 55. But some Canadians have found it’s possible to be mortgage-free sooner if extra steps are taken when making their monthly payments. From the poll, those who have paid off their mortgages in full said they did so by the age 48, seven years earlier than the Canadian expectation! These mortgage-free Canadians used the following strategies to say goodbye to their mortgage sooner.
- 52% made annual lump sum payments when possible
- 42% increased the amount of their regular mortgage payments
- 40% increased the frequency of their mortgage payments
78% of Mortgage-free Canadians say they made a number of sacrifices along the way
Becoming mortgage-free faster requires discipline, a solid plan and a few sacrifices.
- 53% of mortgage-free Canadians say they skipped “unnecessary” purchases
- 53% say they created a budget to track their spending
- 49% say they cut down on extra spending, including restaurant and entertainment costs
- 38% say they sacrificed vacations
Knowing how to best spend your money over the course of your mortgage is important to debt repayment. There are steps you can take to minimize the ‘feeling’ of sacrifice such as using your tax refund for a large lump sum payment in the Spring. If your salary increases, you can increase your mortgage payments by a modest amount rather than pocketing the extra income.
Accelerating your mortgage payments
Using Ratehub’s mortgage payment calculator, we will show how accelerating your mortgage payments can help pay off your debt quicker.
Roji and Abby, both 30-years old, are recent first-time home buyers living in Belleville, Ontario. They purchased their $400,000 home with a 20% down payment amortized over 25 years. They locked into the best five-year fixed rate of 3.09%.
If they make minimum monthly payments of $1,529, they’ll be mortgage-free at 55.
However, if they decide to switch their mortgage payment frequency from monthly to accelerated bi-weekly, they could pay off their mortgage sooner and save an additional $17,270 in total interest paid over the life of their mortgage.
Becoming mortgage-free faster requires careful planning and a few sacrifices. The first step should be finding the lowest mortgage rate possible to reduce the interest payable. After that, you would want a mortgage product that allows generous prepayment options to start reducing your principal. The faster you pay off your mortgage, the quicker you build equity for your future.
CIBC is a leading North American financial institution with nearly 11 million personal banking and business clients in the US and around the world. You can access current CIBC mortgage rates on Ratehub. The poll was conducted between March 29th – April 2nd, 2012.