How to Shorten the Length of Your Mortgage and Minimize the Cost of Borrowing

There are many benefits to shortening your mortgage amortization period, and thereby paying less for the cost of borrowing the money. You can free up money for other things in your life – the education of your children, money for your retirement or an emergency fund.

Make more payments. Increase the frequency of your payments. Ask your mortgage professional to show you how you’ll save by paying biweekly or weekly, instead of monthly. Paying more frequently can save you hundreds of dollars in annual interest costs.

Make the largest down payment you can afford. This will substantially reduce the length of time to it takes you to repay the mortgage. If interest rates decrease when it is time to renew your mortgage, consider keeping your payments the same and applying more money to the principal.

Make prepayments or anniversary payments. Most mortgages will allow you to make payments up to 10, 15 or 20% of the entire mortgage once a year. This money is applied directly to the principal, saving you money in annual interest costs. Consider using your tax refund or annual bonus for this type of payment.

Make lump sum payments whenever your financial circumstances permit.

Double your payments whenever possible.

Increase your payments. Most lenders will allow an increase of the mortgage payments by up to 10, 15 or 20% once every year. The increased amount goes directly toward the payment of the principal amount.

Choose a shorter length of time to repay your loan. Ask your mortgage professional to show you how selecting a 20-year amortization period instead of a 25-year amortization period will affect your payments and interest costs. Consider choosing 15 years to repay if possible. Your mortgage payments will be higher but you’ll pay substantially less interest over the course of the loan.

If interest rates have dropped when you renegotiate your next term, keep your mortgage payments the same. More money will go directly to paying down the principal.

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