(NC)—A low interest rate is often seen as the best way to save money on a mortgage and the quickest route to becoming mortgage-free.
But that's only one part of an effective strategy. Don't focus all your time and energy on rate comparisons. It is equally important to look for a mortgage with flexible terms, say specialists in this field.
The average Canadian homeowner will pay his or her mortgage off in 15 years, according to a recent RBC Home Ownership Poll. Less than half (42 per cent) of homeowners are taking advantage of options that allow them to shave years off their mortgage and save on interest costs.
Here are three tips to get you on your way to mortgage freedom:
1) Adopt a bi-weekly payment schedule
An accelerated bi-weekly payment is often the easiest adjustment that can help you save on mortgage interest - especially if you line it up with your paycheque. You end up making 24 bi-weekly payments a year versus 12 monthly payments resulting in interest cost savings as you pay down your principal faster.
2) Take advantage of prepayment privileges
A flexible mortgage may include features such as doubling up a payment or putting down a lump sum at the end of the year. These additional payments are applied directly to your mortgage principal and will reduce your amortization period. Consider putting a work bonus, tax refund or extra savings towards your mortgage balance.
3) Round up your payment
You can chip away at your mortgage without missing a beat by rounding-up your payment amount. Say your accelerated bi-weekly mortgage payment is $557. By rounding up your payment to $600 a month, you could put more than $1,000 per year extra towards principal and be mortgage-free faster.