Burn Your Mortgage: Why Your Mortgage Shouldn’t be a Life Sentence

Many people consider their mortgage a life sentence. I’m here to tell you that it’s not. Many homeowners start with a 25- to 30-year mortgage amortization (how long it will you take to fully repay the mortgage), but there’s nothing stopping you from paying your mortgage off sooner. I’m living proof. I paid off my 30-year mortgage in only three years – and had a big mortgage burning party to celebrate!

Here are my top three tips from my new book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians, on being mortgage-free sooner.

Sean Cooper Burn your Mortgage1. Don’t Buy “Too Much” Home

The simplest way to be mortgage-free sooner is to not take on a massive mortgage. This shouldn’t come as a big surprise. The lower your mortgage, the less time it takes to pay off.

Getting pre-approved for a mortgage tells you how much home you can afford. Just because the bank says you can spend up to $800,000 on a home doesn’t mean you have to. The words up to are key here and are what many homebuyers overlook. You don’t want to spend so much on a home that it’s a drag on your finances.

2. Accelerate Your Mortgage Payments

There’s a common misconception about payment frequency. Many people think that how often they make a mortgage payment plays a larger role in interest savings than it actually does (in fact, it plays a small role.) It’s the accelerated alternatives that save you the big bucks. When you pay weekly (52 payments per year) or biweekly (26 payments per year) instead of monthly (12 payments per year), the interest savings are minimal; in these scenarios, it’s more about finding the payment frequency that best matches your cash flow. With accelerated weekly (52 payments per year) and biweekly (26 payments per year), you’re paying the equivalent of an extra month’s payment every year.

At first glance, you’re probably wondering how you’re saving any interest with accelerated weekly or biweekly. After all, you’re still making the same number of payments as non-accelerated weekly and biweekly. While that may be true, you’re actually paying a slightly higher amount on each mortgage payment.

Paying accelerated on a biweekly schedule that matches your payday is the most painless way to budget for the higher payment. You won’t even realize you’re making higher annual payments (it’s probably a good thing, as you might not choose this option if you did).

3. Make Lump-Sum Payments

Finally, make lump-sum payments whenever you can afford to (most lenders let you do this on one of your regular payment dates during each year of the mortgage term) by tossing “found” money—tax refunds, bonuses, cash gifts—at your mortgage. Look for new ways to save money: brownbag your lunch, switch to a less expensive cell-phone plan or carpool and put the money you save toward a lump-sum payment. Lump-sum payments go straight toward principal, saving big bucks in interest and shaving years off your amortization.

Sean Cooper is the author of the new book, Burn Your Mortgage, which offers frugal living tips to help anyone—from new buyers to experienced homeowners—pay down their mortgage sooner and live well while doing it. It’s available now at Chapters, Indigo and other major book retailers and online at Amazon.

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