A mortgage is usually the biggest liability a person will have in their lifetime.  How can we pay it off in half the time?

There are many ways to save on mortgage interest.  You can choose to shorten the amortization of the mortgage and increase the payment frequency.  For example, instead of having a mortgage amortized over 30 years and pay monthly, you can change it to 20 years amortization and pay accelerated weekly.  You can also make a prepayment directly to the principle of the mortgage.  The motto for paying off your mortgage faster can be summed up in three words, “Pay More Often”.  The follow-up question to this is, where can I find more money to “Pay More Often”?  Many households these days are facing many challenges to keep a budget in check with the price increase in goods and services.  Many Canadians don’t have a lot left over at the end of the month to make that extra mortgage prepayment.  So what can we do now?

There is no such thing as free lunch.  The money has to come from somewhere.  The question is “where”?  You have a choice:  either you work harder for that extra money or would you rather let your assets work harder for you?  You might believe that if you invest your money with the bank by earning 2% in a GIC, you are making money.  Seriously?  What if you use another investment vehicle that earns you 4 times as much or even greater?

House prices in Canada have been appreciating for the past 10 years and this means that over time we have been building equity in our houses that we can leverage to work for us.  Banks now can give you a home equity line of credit (HELOC) up to 65% of your house value at as low as 3.5%.  So as long as your equity is earning more than 3.5%, you are on the green and can apply the difference to your mortgage.  It’s not difficult to find an investment in real estate that pays you a minimum of 8%.  So imagine what your $100,000 HELOC can make you? At least $8000 per year! Although you’ll need to pay $3500 in interest, $4500 can be applied directly to the principle every year.  If you continue to do this each year for the next 5 years … imagine how fast you will be paying off your mortgage! That’s a whopping $22,500 paid off already and that doesn’t even include the additional interest that you will have saved too! What if your investment is making 10%, 15%, etc.?  Now can you see how quickly mortgage will melt away?

If you are interested in learning more about how to set up an investment program like this, free feel to contact me and I can help you start shedding off your excess mortgage weight before you know it!