Dominion Mortgage Pros

At Dominion Mortgage Pros, we know that making mortgage payments can feel like a marathon at times. For many homeowners in Edmonton, Alberta, navigating the path to paying down your mortgage faster or reducing those monthly payments can be an uphill battle. However, there are several smart strategies that can help you achieve your goals.

Understanding Your Mortgage

Before we dive into tips and tricks, it’s important to understand a few basics about your mortgage. Your mortgage consists of both principal (the amount borrowed) and interest (the cost of borrowing). The more principal you pay off early, the less interest you will end up paying over time.

1. Optional Payments

One of the easiest ways to tackle your mortgage a bit faster is by making optional payments. Many lenders allow you to make extra payments toward your mortgage. These payments can reduce your principal balance and lower your overall interest costs.

For example, let’s say you have a $300,000 mortgage at a 3% interest rate with 25 years left. By making just an additional $100 payment each month, you’ll reduce your mortgage term significantly and save thousands in interest!

2. Lump-Sum Payments

If you receive a bonus, tax refund, or any sum of money that you weren’t expecting, consider making a lump-sum payment towards your mortgage. Many Canadian mortgage programs allow for annual lump-sum payments of up to 10-20% of your mortgage balance without penalty. Throwing down a lump sum can shave years off your mortgage life and save you big bucks in interest.

Imagine a scenario where you put a $10,000 lump sum toward your $300,000 mortgage. Not only will you reduce your balance, but you’ll also reduce the interest you pay over the life of the loan—resulting in a more substantial overall savings.

3. Increase Your Payment Frequency

When you set up your monthly mortgage payments, consider increasing your payment frequency from monthly to bi-weekly or even weekly. By making more frequent payments, you pay down your mortgage faster.

For instance, converting a monthly payment of $1,500 into bi-weekly payments means you’ll end up making the equivalent of one extra monthly payment per year. This can drastically impact how quickly you pay off your mortgage.

4. Consider a Variable Rate Mortgage

Variable rate mortgages usually offer lower initial interest rates than fixed-rate mortgages. This can lead to significant savings each month. However, keep in mind that interest rates can fluctuate. If you can tolerate some risk, a variable-rate mortgage could be a way to reduce ongoing costs.

5. Refinance Your Mortgage

Refinancing can be an excellent way to lower your interest rate and reduce your monthly payment. If rates have dropped since you obtained your mortgage, we at Dominion Mortgage Pros can help explore refinancing options. Just remember to consider the closing costs involved and whether they offset the savings you’ll achieve.

6. Budget for Prepaying

In addition to optional and lump-sum payments, it’s wise to budget for pre-payments. Set aside extra funds each month in your budget to apply to your mortgage. This might mean cutting back on meals out or entertainment, but the payoff will be worth it. Even an extra $50-$100 a month can add up significantly over the years.

Conclusion

Paying down a mortgage faster or reducing monthly payments may seem daunting, but with the right strategies, it can be achievable. By using optional or lump-sum payments, adjusting your payment frequency, and exploring refinancing options, you can put yourself in a much better financial position.

Every homeowner’s situation is unique, and at Dominion Mortgage Pros, we’re here to help you find the solutions that work best for you. As Edmonton mortgage brokers, we understand the Canadian mortgage landscape and are well-equipped to guide you through it. Let’s take that journey together!