Buying a luxury home in Ontario is a big investment. However, those who have paid off their mortgage will vouch for the fact that the years of making payments are well worth it. Having a home that you can call your own is undoubtedly an incredible feeling. New homeowners who are just beginning to pay their mortgage often focus on their interest rate. One of the best ways to ensure that you spend as little as possible on interest is to pay off your mortgage faster. In this article, we will be going over all you need to know about how and why you should pay off your mortgage quickly. Follow along below to learn more!
Mortgage Rate to Price Correlation & Why Pay off Your Mortgage Faster?
Your mortgage rate and the price you pay are directly correlated with each other. A part of each payment you make goes towards paying off the final purchase price of your home. While the other part goes towards the lender as an interest payment. Homeowners with high-interest rates end up paying more to their lenders than to their homes. This is why so many buyers fixate on getting a low-interest rate.
Whether you have a low-interest rate or a high one, there is still a way to save yourself from spending thousands of dollars on interest. This way involves shortening the life of your mortgage. Besides your interest rate, the other factor affecting the amount you’ll pay in interest is the time it will take to pay off your mortgage in full (amortization period). Some people choose to stretch out their amortization period to keep their monthly payments low. However, this only means more interest payments in the long run. To spend as little on interest as possible, it is advantageous to pay your mortgage quickly. The sooner you satisfy your mortgage, the less interest you will need to pay. And, with every payment you make, your debt will decrease, while your home equity will increase!
Pay Your Mortgage for a Luxury Home in Ontario With These Tips!
- Pay in Larger Amounts
This solution may seem obvious, but many homeowners deny it as an option. Instead of contributing an extra few hundred dollars to their mortgage, they would rather keep that money. However, making this simple change can save you thousands of dollars in the long run. Not to mention, it will shorten the term of your loan and ensure that more of your money goes toward the house and not your lender. Any additional cash that you can spare towards your mortgage can be of great benefit.
- Get Rid of Other Debts
It can be hard to focus on paying your mortgage quickly when you have other debts to take care of. If you want to be able to make good on your mortgage, it can sometimes be easiest to start by paying off other debts. Things like credit cards and personal loans can cost you a fortune in interest payments. So, it is best to get these debts squared away first.
- Contribute Lump Sums When Possible
Another way to speed up your amortization period is to contribute lump sums whenever possible. Just got an unexpected windfall? Put it towards your mortgage. Received a large bonus at the end of the year? Put it towards your mortgage. Any large sums of money that you can contribute to your home loan can help save you thousands of dollars over the years.
- Make Extra Cash by Renting Your Home
If your home has a suite or a carriage house, consider renting it out to help pay off your mortgage sooner. Alternatively, if you are zoned correctly and live in a desirable area, you could try doing vacation rentals. Either way, renting is a great way to pay off your mortgage, fast.
For those who have had their mortgage for a long time, it may be a good idea to refinance. If your financial situation has changed or you are simply unhappy with your mortgage rate, refinancing could be worth looking into. After all, you may be able to work out a better interest rate.
- Cut Back on Spending
Spending less on a monthly basis is an easy and effective way to free up more cash that you can contribute to your mortgage. Simply limiting the amount you eat out, cancelling unused subscriptions, and limiting your shopping can save you hundreds of dollars per month.
Contact us Today About a Luxury Home in Ontario
Buying a luxury home in Ontario is an exciting endeavour. If you have any additional questions about mortgages and buying homes in Ontario, contact us today. For more information on buying and selling in the area, reach out to one of our trusted team members. Be sure to check out our Instagram page here for the latest updates and more. We’d be happy to help you find an awesome high-end property in Ontario. Feel free to reach out to us at any time, we look forward to working with you soon!