This year, we want to get our mortgage down by $10,000. That means on December 31st of this year our mortgage hopefully will be $10, 000 less then it was on January 1st of this year. With our regular payments we would be able to put around $5000 onto our principle. That is the sad thing about being at the beginning of our mortgage, just over half of our payment goes to the interest!
Here are some of our plans to get to the extra $5000 onto our mortgage. (Before you do this double check your mortgage rules. Most mortgages will allow to pay a certain percentage each year or increase payments without penalties, so check those amounts. No one wants to pay a penalty.)
1. Increase the mortgage payment.
Currently we pay every two weeks. We have it so the mortgage is taken off right after we get paid, which is really handy as it is out of the account before we even notice it.
This year my husbands company is restructuring how they receive part of their bonus. So now instead of being paid out a big amount in March, and then getting taxed at the bonus tax rate (which is super high), all employees across the board are getting a pay raise!
We have decided to increase our mortgage payment by at least the percentage of the pay raise though we will probably do more. This is something that you could do too. Most mortgages allow you to increase your payments by a certain percentage each year. If you get a pay raise calculate the percentage of increase, then increase your mortgage by the same amount. It is pretty painless and you don't have to think about it. The only thing you have to do is call and set it up. Then sit back and let it happen.
We are planning on taking this a step further. When we got our mortgage interest rates were pretty low. We know that when our 5 years is up (we have 2.5 years left), and we have to renegotiate, the interest rates will undoubtedly be higher. We don't want to be stuck in the lurch (hence why we are trying to payback as much as possible), so this is what I did.
- I found out the highest interest rate for a 5 year fixed mortgage.
- I calculated how much would be left on our mortgage at the end of our term if we put nothing extra on it. (There are lots of online calculators that will help you do this.)
- I calculated what the payment would be at that interest rate that mortgage amount lowering the amortization period to what it will be when we renegotiate.
- I made that number our new payment
It is a bit higher than what is most comfortable, but we are really wanting to make a dent in our mortgage. If it is too much we can always lower it again. I figured this way if our payments did go up, we would already be used to it, but also, it is an easy way to put more on your mortgage and then not have to pay as much with the next term. Or we could even shorten our amortization if we wanted. Doing this allows us to have more options when it comes to renegotiating our mortgage.
2. Extra pays
Since we get paid every two weeks there are two months each year where we have a third pay. When those third pays come up, we will put the leftover onto the mortgage. So, whatever is left over after the usual things come off (i.e. savings and mortgage payment) we will put it right onto the mortgage. For us that means putting on the equivalent of another months mortgage when you add up the two payments. That's pretty substantial. And the best part, it goes right on to the principle (though you should double check that). Lower principle means lower interest and that makes me happy.
This could also include any bonuses you might receive. At my husbands company they get paid a bonus every March. While this years bonus is going to go towards savings goals we have, next year the bulk will be going onto the mortgage.
Tax returns are the same. This year again, we are putting our tax return to savings but next year we will be putting a big chunk of it onto the mortgage. We want this sucker gone!
3. Be financially prudent
As I have said in another post, this is the year that we are really going to be watching our spending, curbing our wants and really get our financial house in order. We have other financial goals, besides the mortgage. We want to have $5000 in savings by the time this year is done and we want to be able to save for our summer vacation so we don't have any debt because of it. So, our aim for our vacation is around $5000, though hopefully we can do it for cheaper. (Though the exchange rate is not going to be very kind to us unless the dollar picks up before summer.)
If we achieve these two goals quickly, because of being prudent, we will be able to shift our focus solely onto the mortgage and adjust the cashflow so more can go onto the mortgage. That way, if we have extra cash because we don't have to pay our health insurance fees for a pay period, or if we have maxed out our CPP and EI payments and don't have to pay those anymore (it usually happens in September for us) we can put all of it on the mortgage instead of savings or some other debt we could have if were were not being prudent.
I know I sound like a broken record when I say that every little bit helps and it all adds up, but it is true. Little things will make a big impact down the road. Sometimes we want things to be different or change right away. And the thing is, that's not going to happen. If you have debt, of any kind, you have interest working against you and it is a constant obligation. It doesn't take you long to dig a financial hole, but filling it up takes a while, and it is not the most fun thing to do. But you know what? Just do it, and you will feel so awesome when it's done. That's how I felt when I made my last student loan payment (and I did that only four years after graduating!)
Do you have any tips for paying down your mortgage, or other debt? What has worked for you?
This could also include any bonuses you might receive. At my husbands company they get paid a bonus every March. While this years bonus is going to go towards savings goals we have, next year the bulk will be going onto the mortgage.
Tax returns are the same. This year again, we are putting our tax return to savings but next year we will be putting a big chunk of it onto the mortgage. We want this sucker gone!
3. Be financially prudent
As I have said in another post, this is the year that we are really going to be watching our spending, curbing our wants and really get our financial house in order. We have other financial goals, besides the mortgage. We want to have $5000 in savings by the time this year is done and we want to be able to save for our summer vacation so we don't have any debt because of it. So, our aim for our vacation is around $5000, though hopefully we can do it for cheaper. (Though the exchange rate is not going to be very kind to us unless the dollar picks up before summer.)
If we achieve these two goals quickly, because of being prudent, we will be able to shift our focus solely onto the mortgage and adjust the cashflow so more can go onto the mortgage. That way, if we have extra cash because we don't have to pay our health insurance fees for a pay period, or if we have maxed out our CPP and EI payments and don't have to pay those anymore (it usually happens in September for us) we can put all of it on the mortgage instead of savings or some other debt we could have if were were not being prudent.
I know I sound like a broken record when I say that every little bit helps and it all adds up, but it is true. Little things will make a big impact down the road. Sometimes we want things to be different or change right away. And the thing is, that's not going to happen. If you have debt, of any kind, you have interest working against you and it is a constant obligation. It doesn't take you long to dig a financial hole, but filling it up takes a while, and it is not the most fun thing to do. But you know what? Just do it, and you will feel so awesome when it's done. That's how I felt when I made my last student loan payment (and I did that only four years after graduating!)
Do you have any tips for paying down your mortgage, or other debt? What has worked for you?
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