There Are Many Strategies To Pay Off Your Mortgage Faster…but All You’re Doing Is Using Your Own Money Sooner!

If we as Canadians are inclined to do a little research into how we can improve our financial condition, we will frequently come across pieces espousing a number of different strategies on how to eliminate our expensive mortgages faster than if we take no action.  And we all know that paying off your mortgage sooner than the mortgage contract requires can save you thousands of dollars.  And so eliminating that mortgage sooner rather than later sounds like a good idea.  And it is.  So congratulate yourself for taking the initiative to seek out strategies that can improve your financial well-being.

Here are a few of the most common suggestions:

  • Make prepayments – every once in a while, make an extra payment against the mortgage. You will be able to see the prepayment privilege your bank offers you on your mortgage contract.  If you can, make extra payments on your mortgage every once in a while and you will reduce the amortization – the time to mortgage retirement.  And the quicker that day comes, the less you will pay in interest overall. Great!
  • Increase the frequency of mortgage payments – most people think of mortgage payments as being monthly expenses, but you can increase the frequency to accelerated bi-weekly or weekly payments. You will take months off the amortization and save thousands of dollars in the end.  Wonderful!
  • Increase the amount of your mortgage payment – again, your mortgage contract will tell you if you are able to increase the actual amount of the payment. Simply increasing the amount you pay per payment period will take significant time off that mortgage and save yourself lots in interest expense.  Fantastic!

But here is the problem: with the above strategies, all you are doing is using more of your own money sooner.  And how much more of your own money do you really have?

We know with certainty that life in Canada is not cheap.  A typical middle-class Canadian family has almost half of their total income going to the government in various forms of tax.  In fact, Canadians pay more in tax than they do on food, clothing and shelter combined.  That’s more than the basic necessities of life – what we need for simple survival!  So it is not a stretch to understand that most Canadians just can’t scrape together a few extra dollars in a meaningful manner with which to make their mortgage disappear sooner.  And what compounds our financial struggles is that if we don’t have any money to prepay our mortgage, we certainly don’t have enough money to save or invest for our retirement.  So the net result is that we end up owning this expensive mortgage for 25 or 30 years and by the time we retire, maybe we have finally paid it off but we have no retirement portfolio and now have to rely on CPP and OAS – we may have a public or corporate pension plan, but those who do are in the minority.

So here’s another option: instead of only using more of your own money sooner, use somebody else’s money now!  If you can scrape together some of your own money to implement the above three strategies, great – do so – but even if you can’t, you still have the ability to generate meaningful tax refunds from the government.  And if the government is sending you money each year that otherwise you wouldn’t receive, you don’t have to rely solely on your own money to get rid of that mortgage.  Make the government help you pay down that mortgage.

And a wonderful consequence is that you will be able to start saving for your retirement immediately.  Not in 25 or 30 years from now.  Immediately.  Eliminate that expensive, non-deductible mortgage faster, generate tax-free refunds from the government, save for your retirement, simultaneously.  Look into it, you have nothing to lose by educating yourself further on how you can improve your family’s financial condition.

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