Paying off your mortgage loan early can save you a lot of money in interest payments and provide financial freedom. However, it can seem like an overwhelming task, especially if you’re not sure where to start. In this article, we’ll provide a step-by-step guide for Canadians on how to pay off your mortgage loan early.
Step 1: Determine Your Mortgage Loan Terms
The first step in paying off your mortgage loan early is to determine your mortgage loan terms. Find out your mortgage loan balance, interest rate, and the term of your loan. This information will help you determine how much you need to pay off and how much interest you’re paying each month.
Step 2: Create a Budget
Creating a budget is essential to pay off your mortgage loan early. List all your monthly expenses and income to determine how much you can afford to pay towards your mortgage loan each month. Look for areas where you can cut back on expenses to increase your mortgage payment.
Step 3: Increase Your Mortgage Payment
Once you’ve created a budget, increase your mortgage payment by as much as you can afford. Even increasing your payment by a small amount each month can save you thousands of dollars in interest payments over the term of your loan.
Step 4: Make Bi-Weekly Payments
Making bi-weekly payments instead of monthly payments can also help you pay off your mortgage loan early. By making 26 bi-weekly payments each year, you’ll make an extra month’s payment towards your mortgage, which can significantly reduce the term of your loan.
Step 5: Make Lump Sum Payments
If you receive any lump sum payments, such as a bonus or tax refund, consider putting that money towards your mortgage loan. Making lump sum payments can help you pay off your mortgage loan early and save you money on interest payments.
Step 6: Consider Refinancing
If your interest rate is high, consider refinancing your mortgage loan to a lower interest rate. This can help you save money on interest payments and pay off your mortgage loan early.
Step 7: Avoid Mortgage Penalties
Before paying off your mortgage loan early, check with your lender to make sure you won’t face any penalties. Some lenders charge a penalty fee for paying off your mortgage loan early.
Paying off your mortgage loan early can provide financial freedom and save you money on interest payments. By following these steps, Canadians can take control of their finances and pay off their mortgage loan early. Remember to create a budget, increase your mortgage payment, make bi-weekly and lump sum payments, consider refinancing, and avoid mortgage penalties. With dedication and discipline, you can achieve the goal of paying off your mortgage loan early and enjoy financial freedom.