The Age Old Question: Is It Better To Pay Down Your Mortgage Or To Invest?

First, I would turn the questions back on you:

1. What mortgage interest rate are you paying?
2. What would your rate of return be on your investment?
3. What kind of risk(s) would there be on the investment(s)?
4. Is the value of your home increasing over time?

Here is the biggest question: why do you have to choose one or the other to Pay Down Your Mortgage or invest, when you can do both?

Here are some tips to Pay Down Your Mortgage faster without breaking the bank:

1. Accelerate Your Mortgage Payments

Switching your mortgage payment frequency from monthly to biweekly doesn’t really help to Pay Down Your Mortgage faster. You’re basically just paying less money more frequently. However, if you ACCELERATE your payments, that’s a different story. The reason is that you are paying “more than necessary”, more frequently. For example, if you make biweekly accelerated payments, you are taking your monthly payment, dividing it by 2, and paying that amount 26 times per year. That essentially represents 1 extra full monthly payment per year and cuts years off your mortgage.

2. Rounding Up Your Mortgage Payments

This one is also easy to do. If you’re paying $379 biweekly, consider rounding it up to $400. You might not miss the extra $21, but you will sure Pay Down Your Mortgage much more quickly.

3. Reduce Your Amortization

If or when you refinance, you might consider reducing the amortization period of your mortgage if you can afford it, to Pay Down Your Mortgage more quickly. I’m not a big fan of this one – because the other options above give you flexibility. I’m all about flexibility and options. If money gets tight, you can always reduce your payments again or change the frequency. But if you reduce your amortization, you can’t change your mind easily to extend it later.

4. Lump Sum Payments

Most mortgage lenders allow you to make lump sum payments on your mortgage once a year without penalty. If you can save up money during the year, you can make a lump sum payment and Pay Down Your Mortgage much more quickly. Even $1000 makes a big difference!

5. Lower Your Interest Rate

Amortization is the big killer in mortgages. The longer you take to Pay Down Your Mortgage, the more interest you pay. It adds up very quickly. Rate is also important. If you can have the best of both worlds, why not? Let us shop for the best rate for you and use all the tips above to Pay Down Your Mortgage quicker and be mortgage free sooner!

Robert Floris is a Mortgage Broker. His office is located at 651 Fennell Avenue East in Hamilton, Ontario. If you would like to speak with Robert, he can be reached at 905-574-9200 #215. Alternatively, you can contact Robert here.

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Thanks for reading!