Shave Years Off Your Mortgage

Once you've been a homeowner for a year or two, you may find yourself thinking of getting rid of something you valued when you first bought your home - your mortgage. There are a few simple ways to pay down your mortgage more quickly:

Reduce your amortization period

Reducing your amortization period can save a lot in interest costs in the long run. This chart compares monthly payments on a $100,000 mortgage amortized over 15 years with those for the same mortgage amortized over 25 years. You can see how great the savings are with a shorter amortization.

Make lump-sum pre-payments

Most financial institutions will let you make a lump sum payment once a year - usually at least 10% of the original principal, and usually on the "anniversary" date of your mortgage.

Many lenders will offer you the option of "doubling-up" any regular payment on any payment date. These double-up payments will go directly toward paying down your principal.

Increase the amount of your payments

If you find yourself with an increase in your cash flow, many lenders will let you increase your payment amount with no penalty during your term, so you don't have to wait until renewal time. In general, you can increase your payment by at least 10% once every 12 months, and the payment add-on will go directly towards your principal.