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How we Paid off our Mortgage in 3 Years


In the October 2010 net worth update, I briefly mentioned that I was planning on paying of the mortgage balance this month and I’m happy to say that we’re mortgage free in 2010!  As this is a significant milestone in any financial journey, I thought that it deserved a post all on its own.

History

It all started when we purchased our first house in the summer of 2003, right after graduation.   The goal was to keep costs low, so we purchased a two apartment home to live in the upstairs while renting out the basement apartment.  I raided my cash savings for the down payment and went all-in on our first house.  Fortunately, 2003 was a time when houses were priced very reasonably, and combined with rental income from the apartment, our housing expenses were very low.  A couple years later, I found a great deal on an investment property, put a small 10% down payment and ended up being a landlord to another property.

With the principal residence, I wasn’t as motivated to pay off the mortgage as half of the interest was tax deductible.  While we did pay on a bi-weekly accelerated schedule, we didn’t do much in terms of annual lump sum payments.  As a result, when we did sell that house four years later, the balance didn’t decrease by a dramatic amount but combined with appreciation, we walked away with about $55k after fees.  We chose to move as we decided to expand our family, and the two apartment just wouldn’t work for us in terms of space and location. With that in mind, we built a house in kid friendly subdivision that is zoned for relatively good schools – we still live there today.  In hindsight, we should have held onto the first property as real estate has appreciated significantly since that time, but as you know, hindsight is 20/20.

Back on the topic of mortgages, we poured the proceeds of the sale of the first home, a fairly substantial cash savings amount, and the liquidated proceeds of my non-registered portfolio to put towards the new house.  With that hefty down payment, we managed to start with a 3-year open discounted variable mortgage with a balance of $150k.   As our careers were advancing, and business income ramping up, we felt confident in our income so we topped up our bi-weekly payments by about 50% in addition to making lump sum payments where possible.  What also really helped out was that  in early 2009, we decided to sell our rental property that netted us around $30k to put against the house.

All in all, the combination of savings generated from our frugal habits, reasonable mortgage balance for our incomes,  increased bi-weekly payments, and putting any lump sums to pay down the house resulted in paying off our house in less than 3 years.  We are mortgage free in 2010!

Strategies for Paying Down your Mortgage Faster

As previously mentioned, we paid off our mortgage at a fairly rapid pace, here are some of the strategies that we used:

  1. Set a Goal – I had a goal to pay off the mortgage before the open term was up which was 3 years.  What works for me is to set the big goal, and take baby steps towards it.  The baby steps include some of the tips below.
  2. Establish Savings Habits – It’s pretty difficult to aggressively pay down the mortgage without establishing proper saving habits.  Having the ability to generate savings brings a lot of freedom and can ultimately lead to paying off the mortgage faster.  Here are some ways to save money.
  3. Reasonable Mortgage Balance.  My personal rule is to never obtain a mortage for more than 2x household income.  For example, with our new build, the price was well over our annual incomes.  However, with our large down payment, we managed to bring the mortgage balance to a little over 1X gross household income. 
  4. Accelerated Bi-weekly Payments – This is a common strategy that works!  By simply paying the mortgage during bi-weekly pay periods (instead of monthly) can result in an extra payment by the end of the year, which ultimately means less interest.  This strategy alone can reduce the mortgage amortization by 3-4 years.
  5. Topped up Payments – I like the strategy of topping up mortgage payments as it is forced savings.  Even an extra $100 per mortgage payment can make a  difference in amortization.  Most fixed mortgages allow payments to be topped up by as much as 100%.
  6. Annual Lump Sums – This goes back to having savings habits.  With strong savings, it enables the homeowner to use up some of those prepayment mortgage allowances.  I believe common practice for a fixed mortgage is 20% of the original mortgage balance can be paid down per year.  As our mortgage was an open mortgage, we took advantage and put large amounts when cash was available.  For example, when we sold our rental property and liquidated the non-registered portfolio.

Do you have a goal of paying off your mortgage in a short period of time?  What are your strategies?

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FrugalTrader About the author: FrugalTrader is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 100 comments… add one }

  • iamphysio November 25, 2010, 8:25 pm

    Congratulations but….
    I can’t believe I’m the only one saying this. Yes it’s great to make accelerated bi-weekly payments, and to top off payments by 50% is quite an accomplishment. However even if I did this (biweekly accelerated I do) my mortgage would be paid down another $6,000 per year (on a 150,000 mortgage). Yes you put the $30,000 down from a rental property but that leaves 120,000 to pay off in 3 years! Annually you would need to pay off 40,000 of which about $13,000 would come from mortgage payments and the 50% top up. That leaves 27,000 more each year or $2250/month net. This isn’t accomplished by cutting coupons or by not taking a vacation this year. I’d have to say I’m incredibly frugal but even if I stopped eating, paying for my utilities, paying for any insurance (house, life, AD+D, Car), and contributing to charity I wouldn’t be able to save 2250 more a month. I have a well paying job, rental property income of $600 monthly, wife working part-time and we juggle child care responsibilities so we don’t have to pay for daycare costs for our 4 children. We get hand me downs from my family for clothes, drive a 12 year old vehicle, don’t drink, smoke etc,etc. What I guess I’m getting to is that this isn’t just accomplished by the normal means of accelerated biweekly payments and topping up payments and being frugal. This is accomplished by living well below your means and/or increasing your income substantially with side businesses. I don’t want to sound negative because this is a great accomplishment but the emphasis really needs to be on these last two pieces of the puzzle.

  • nobleea November 25, 2010, 9:07 pm

    iamphysio,

    what you are alluding to, and what is one of the biggest reasons why FT paid the mortgage off in 7 years, is that a house was purchased that was cheap when compared to their salary. He only took out a mortgage worth 1x annual family salary. Obviously that’s not possible in a lot of canadian cities without a massive salary. But in a small town, or most places in the maritimes, it would be quite achievable when there are two professional salaries in the household.

  • FrugalTrader FrugalTrader November 25, 2010, 9:31 pm

    @nobleea, thanks! There are a lot of new readers from a globe and mail link, and I can see how they would have questions.

    @iamphysio, as nobleea mentioned, we kept our balance low relative to our incomes. But it also helps that during the 3 years, we had a very low rate environment and we had a very low discounted variable rate. Therefore, most of our payments went straight to principal.

  • Financial Cents November 25, 2010, 10:34 pm

    Wow – congrats! Amazing.

    Did you ever doubt you could do this?
    Did you ever feel tempted to invest more now vs. pay-down your mortgage later?

    Your blog continues to be an inspiration to me, and I’m sure, thousands of others. Keep up the great work.

    My Own Advisor

  • Melanie Samson November 25, 2010, 10:35 pm

    Congrats! It’s definitely a huge milestone. We’re working on student loans first but the mortgage will be next in line.

  • Ty Webb November 25, 2010, 11:20 pm

    Here’s why I don’t agree with the “Interest rates are low, invest your money instead” argument. While rates are very low now, why not bang off your mortgage as quickly as possible? Say your 5-year term comes due and rates have shot up dramatically. Now you’re stuck paying a fortune in interest, while your investments may or may not have appreciated greatly. If you had paid the mortgage off in the 5 years you are insulated from the high interest rates and you can use them to your advantage by buying GIC’s at the high rates with all of the free cash that you used to spend on the mortgage every month.

  • Brian Poncelet, CFP November 25, 2010, 11:55 pm

    FT,

    Congratulations! I know you will make your money work hard! What a great story!

  • Canucktuary November 26, 2010, 12:48 am

    Congrats FT. Your news crashed the servers earlier in the day when that link was posted on the G&M’s front page!

  • Tom @ Canadian Finance Blog November 26, 2010, 1:49 am

    Congrats FT, that’s great! I have a long way to go on my mortgage. We actually have a 35 year amortization, not because we plan on actually taking 35 years, but just to give us low payments for the next 5 years while my wife is at home with our child(ren?) Once all kids to come are a few years old she’ll go back to work and we’ll finally ramp up the payments.

  • JFG November 26, 2010, 2:18 am

    Your explanation to Accelerated Payment was a little off. And “No Debt Guy”, it is not a scam, it is a proven method to pay down your mortgage a little faster.

    Simply put, let say you have a mortgage at $1000/month, it just means that you will now pay $500/b-weekly. That means, two extra payments of $500 a year.

    At the end of the day, monthly, bi-weekly, weekly or bi-monthly is not the issue. Just pick the same day as your pay cheque, it will make things easier.

    As for the pay down your mortgage vs savings (RRSP/TFSA/Non-registered) argument, it is never black/white. You cannot say he did a good or bad decision without knowing ALL his story. That’s why the the good FA’s out there always ask you questions about your life first, before the investments.

    And as a side not, extra lump payments are usually 100% Principle. That’s why they are so effective to bring down your mortgage.

    Congrats though. Time to break the bubbly.

  • FrugalTrader FrugalTrader November 26, 2010, 9:57 am

    @financial cents, thanks! As for your questions, we were at a point where we were putting a lot of cash into investment accounts, but running out of investment ideas, so debt was a good alternative. I didn’t have too much doubt as I did calculations as to how much my regular payments would reduce the balance, and the remainder was a reasonable lump sum amount.

    @Canucktuary, you are right! I actually had my host upgrade my VPS account to deal with the traffic.

    Everyone else, thanks for the kind words!

  • geoff November 26, 2010, 12:22 pm

    It is clear that, without intending to discount the accomplishment, that two things seem really to have been the root cause of this – 1, buying a house that was 1x household income and 2 not having children

    The simple truth is that many people in major cities in Canada can’t buy a house that is 1x household income that is their ‘forever’ home. (IE it’s not prudent to buy a bachelor condo if you have 2 kids, etc). Even our modest detached house in Toronto was 3x our income (and our current mortgage just over 2x). The second reason this was possible was not having children. Daycare costs about $16,000 a year in TO. That adds up fast. We bought our house in 2007, had baby two weeks later, and I was 32 and my wife 30. Now I’m aiming to be mortgage free at 43 and even that is probably agressive (8 years from now).

    So those of us with kids who live in metropolitan areas – and yes I realize we could have bought a cheaper house but I left home at 8:05am this morning and was at bay/bloor at 8:40am and its hard to put a price on that commute – shouldn’t feel too bad that we can’t realistically accomplish this and just be proud / envious that others have but at trade-offs (such as not living in Toronto, Vancouver or possibly Montreal) ;)

  • FrugalTrader FrugalTrader November 26, 2010, 12:32 pm

    @geoff, couple things.

    For both principal residences, we purchased our houses with mortgage balances just over 1x our household income. The houses themselves were much more than 1x. For example, our current house was purchased for $275k.

    To your second point, we have a toddler and expect to have more.

  • Chris Tringham November 26, 2010, 1:36 pm

    Great article, and as usual the comments were the icing on the cake. This whole ‘pay-down-mortgage-to-sleep-better-at-night’ argument don’t fit my personal strategy but I respect those who take the discipline. FT, I think you should put a poll up on the front page asking if people had a mortgage whether they would accelerate payments to the mortgage or to investing. I’d be very interested to see results.

    One other thing not mentioned by any commentor is the prospect of investing in rooftop solar panels. This can often yield returns of 15%, guaranteed cash flow from the government! Use your eliminated mortgage payments to purchase the solar panels and then sell the power into the grid. Easy money!

  • nobleea November 26, 2010, 1:49 pm

    Chris:
    I think the juicy electricity rates and rebates for solar panels are only in Ontario. And there is some uncertainty as to whether they will keep them around.

    It’s hard to justify solar panels in Alberta for example, when we only pay 4-5c/kWh. And before anyone comments that there’s not enough solar energy, both Edmonton and Calgary have the greatest potential for solar power generation of any major city in Canada (both hours of sunshine and solar insolation values).

  • Joe Blow November 26, 2010, 1:59 pm

    You’d never be able to do this in Vancouver. Believe me. You cannot buy a single detached home in Vancouver, West Van, or North Shore on 2x your income.

    We are dinks and live frugally. Property taxes and utilities and BC personal income taxes eat up your income. We are on a 35 yr amortization but paying more than our accelerated biweekly payments to make our current mortgage a 25 yr am. We’ve also put down additional down. We’ve maxed our RRSP and TFSA.

  • geoff November 26, 2010, 2:07 pm

    Ok followup questions –

    So you bought a $275K house with an impressive $125K down; so in other words you paid back $150K mortgage with presumably an income of around $140K (because you said the mortgage was just over 1x your household income).

    In Toronto $275K doesn’t even come close to enough money to buy a proper house let alone the costs of renovating to get it up to reasonable standards (and I don’t mean granite countertops, I mean removing tube and wire electricals, 30 year old furnaces, etc). I have to ask what city you’re in and what your daycare costs are. In this city, they are ridiculous if you are lucky enough to find spots.

    Please realize that I’m not saying that’s not impressive what you’ve done. It is, but it’s largely also a matter of some luck and some help and the benefits of having a long-term relationship – many of us don’t meet our partners until our late 20s/30s which cuts back on networth). They say success is what happens when good planning and good luck meet, so I’m not discounting the good planning you’ve done in any way.

  • FrugalTrader FrugalTrader November 26, 2010, 2:37 pm

    @geoff, the goal of the article is not to show that “anyone” can pay off their mortgage in 3 years, but it does show that home owners can dramatically reduce their amortization terms should they focus on it. As well, you choose where you live. You can buy housing for 275k in toronto and area, but again, you choose your own lifestyle standards.

  • BluenoserinCowtown November 26, 2010, 3:35 pm

    The details make me feel a little better about our efforts. We’ve paid down our mortgage about $100K in three years, despite a wedding, many trips across the country to attend to family and both of us getting laid off during that time.

    congrats FT, can’t wait to join you in the mortgage free category (even though it will be a while yet!)

  • geoff November 26, 2010, 3:55 pm

    @ FT – I think there were others like bluenose and me who agree the details make us feel better. @ Blue – we’re in the same boat. Paid $451K with a $60,000 downpayment + $30,000 in renos. Didn’t want to touch the roughly $50K we had in rrsps. Have paid down $100K in 3 years too, despite a baby and other interruptions. I’m counting the days until daycare costs get cut in half to a more reasonable $8000.

    As for choosing where you live, that’s true to an extent. Many of us have family that we’re close to, have jobs that we have seniority in or enjoy, work in sectors that are central to downtown Toronto (ie Marketing, legal or finance) etc. Though yes, we could find properties outside of Toronto for $300K, a 2 hour commute is not the best use of finances or time either. So I do congratulate you, but I’d also congratulate you if instead of paying down your mortgage you’d put that money into a stock that returned 15%. The fact is, you have extra money because your houses are much lower than your incomes; now you are very smart to not spend that on a newer car etc, etc however.

  • Sampson November 26, 2010, 7:53 pm

    Very curious about all the ‘skeptical’ energy of some of the posts. No, not everyone can pay off a mortgage within 3 years, and FT’s story is certainly one of good planning, good luck, and vigilance to a financial plan.

    Who says one can’t buy a house with a mortgage 1-2X annual salary? No one says you have to buy a house right after getting married, your early thirties etc. Why can’t you live in Vancouver, save up to $300-$500k in your mid- to late forties before buying your first home?

    I haven’t paid off my mortgage, refinancing the first home to fund a bigger second home, but my story could be very similar to FT’s. My mortgage could be gone tomorrow if we focused less on investing and more on debt repayment.

  • Zip November 26, 2010, 8:10 pm

    @Sampson:
    Quote: “Who says one can’t buy a house with a mortgage 1-2X annual salary? No one says you have to buy a house right after getting married, your early thirties etc. Why can’t you live in Vancouver, save up to $300-$500k in your mid- to late forties before buying your first home?”

    I agree.

  • Jane November 26, 2010, 8:34 pm

    CONGRATULATIONS on being mortgage free! We paid off our balloon mortgage in 5 years. We did this by putting 1 income toward the mortgage (especially toward principle reduction) and living off the 2nd part-time income. I know people talk about mortgage interest being tax deductible but I’d rather have other forms of tax deductions than a mortgage interest deduction.

  • cannon_fodder November 27, 2010, 2:43 am

    Yes, FT, we will eliminate the HELOC completely. In 4 years we plan to retire outside of the country so we won’t have a house to borrow against in Canada.

  • Geoff November 27, 2010, 2:46 am

    @ Sampson and Zip – “Why can’t you live in Vancouver, save up to $300-$500k in your mid- to late forties before buying your first home?”

    The average house price in Vancouver is $700,000.

    I think your scenario is fair but waiting until late 50s to 60s gets a little depressing.

  • Meg November 27, 2010, 10:36 am

    That is awesome! Congrats!

    Hubby and I just refinanced our home from a 20 year, 5.99% to a 15 year 3.85% mortgage a few months ago. We are currently working on paying down debt and will then work on the mortgage. The great part is that if we pay just $150 more on the payment a month, our 15 year mortgage will be a 10 year mortgage. Right now, we have only 2 debts to pay off before we put big chunks toward the mortgage. We have less than $2,000 on hubby’s 2007 vehicle and then $7500 on his credit card from a previous marriage (over 7 years ago!)

    Our mortgage is LESS than our annual income by $10,000. The whole reason for wanting to get out of debt is so that we can get out of jobs that we dont enjoy and be able to live off of less money. And possibly starting a family. The mortgage isnt much at all – $420/month (not including taxes and home owners insurance.)

    To pay off our mortgage in 3 years, we’d have to pay $1750/month. That’s not going to happen. But we definitely will have it paid off in 10 years or less…easily. And with me turning 30 in just a few months, it’s great to know that we can be debt free including the house by 40 (or sooner!)

  • Sampson November 27, 2010, 11:27 am

    Sorry Geoff but I don’t agree with your numbers what so ever.

    You yourself mention you have managed to pay off 100k in 3 years. So to save $300-$500k would only take 9+ years. You yourself could buy a place in Vancouver in your 40’s. Average price in Vancouver is misleading, yes, very few Canadians can buy a detached house in Vancouver proper, those who do, pay 60% of gross income towards housing, but they make that choice.

    Whether its a depressing scenario or not, that’s reality. Many posters, yourself included have already pointed out that the 1X salary mortgage is not reasonable in most major cities, that’s what makes his ‘other’ tips for paying down sooner much more relevant to us mortals than to FT himself. 4 years off a 25 amortization by making that extra 2 payments per year is huge for most Canadians.

  • Jimmy Dean November 27, 2010, 7:08 pm

    I am happy for FT. Kudos to him. But the key point is Location..Location and Location. In urban centers like Toronto, Vancouver, Calgary, Montreal etc. average income to home price ratio is 1:5

    You cant find a decent place for 250K in these places probably a condo. FT surely is living in small town. Even with 125k down payment, detached home in GTA costs 500K in decent area. Thats good 375K in mortgage. To pay this mortgage with average income 100K/family will take at least a decade with considerable discipline (living on Campbell Soup) and luck (hoping not to loose job and not be divorced).

  • nobleea November 28, 2010, 2:25 am

    “In urban centers like Toronto, Vancouver, Calgary, Montreal etc. average income to home price ratio is 1:5″

    Hint hint…maybe one shouldn’t buy a house in that scenario, and rent instead. In Vancouver for example, renting makes way more financial sense.

    Prices always revert to mean. Sometimes quickly, usually slowly. 20% drop seems reasonable at this point (or flat for however many years it takes for inflation to equal a 20% drop).

  • Joey November 28, 2010, 2:41 am

    Nice to see other people are willing to make small sacrifices in the short term for huge benefits in the long term.

    My wife and I are 33 and 35 and are currently renting. We saved over 380K and will be looking to buy a house for cash in the new year. Once the house is paid in January we will be using about 30K per year and maxing out our RRSPs and using the refund to max out our TFSAs. It’s nice to be mortgage free!

  • Julie Kinnear November 28, 2010, 9:20 am

    It is true that you have to carefully select the location before you choose where to buy a property. And also the strictest criterion is financial condition of buyers. The promising way how to support estate market is to put more pressure on banks to prepare more varied and accessible mortgage products.

  • Geoff November 28, 2010, 3:48 pm

    @ Sampson – while we have paid down $100K in principle in 3 years, that’s not the same as saving $100K while paying market rates for a house rental @ 2000K / month we’ll say. And this is at a time when interest rates are very low.

    @ Nobleaa – As for renting, I’m a huge advocate for renting over buying; however when you have children you feel a need to put down roots and have some security over where you will raise your children. You may not feel that way, and garth turner definitely doesn’t feel that way (despite him owning his own home) but that’s how I feel. Also it’s hard to find quality house rentals in Toronto for under $2K/month. You can find a floor,but a wholehouse is hard to find.

    Paying down our mortgage is a primary goal of our finances, that and staying out of debt in our 30s; I applaud FT for accomplishing his goals and encouraging others to follow his other tips; but feel that his posting would have benefited from being more clear with his figures in the beginning.

  • Pinyo November 29, 2010, 10:36 pm

    Congratulation. That’s quite an accomplishment.

  • Steve November 30, 2010, 12:59 am

    That’s fantastic. I’m impressed – hopefully I’ll join you before too many years have gone by!

  • Elena November 30, 2010, 1:01 am

    Great article and very motivational!
    I think I will start putting some extra money towards my mortgage every month as well.
    In spite of a tax deduction, everyone’s dream is to have their house free and clear, especially when you are heading towards retirement.
    Thanks for your atricle, it’s greatly appreciated!

  • QCash December 6, 2010, 6:10 pm

    Congrats FT! Enjoy your new found freedom!

  • OIiver Manalese December 8, 2010, 7:15 pm

    Congratulations! That is phenomenal news for you! I love reading stories of successful home owners taking responsibility very seriously and able to achieve their goals.

    Cheers,

    Oliver

  • Brian December 16, 2010, 1:55 pm

    We focused on how we purchase (everything) which makes how we pay a much easier proposition. eg. We mortgaged 1/3 what the bank offered, bought in a smaller community with good living standards but small city prices, bought a fuel efficient car and car pool to work, buy household items on cash back credit card and pay off every month, buy used tools-furniture-whatever that still has significant life in it instead of new.

    I car pool to work and my wife drives 10 minutes to her work, reinvest dividends from non-registered investments and work bonuses into the mortgage every quarter.

    Kid on the way, house being renovated, 1.5 years on the mortgage clock.

  • dustin February 9, 2011, 12:54 pm

    bought my house at 25 and paid it off at age 34, just dicipline, no fancy vacations or cars during that time, never ever lease a car, because it is no different then renting an apt. by a used never new car and learn how to fix it or buy a used reliable car. new car is a total waste of money i (2 year ago) bought a gorgeous audi a6 black mags etc…..for 20k this car new is 65k + tax, nobody knows the age or mileage it runs and looks new take care of your things and never skip maintenace will cost much more down the road. good luck everyone.`

  • dustin February 9, 2011, 1:01 pm

    don’t carry a balance on your credit cards, interest crazy high. if you can’t afford it don’t buy it. pay cash when you can and moderate your expenses, restaurants are very expensive and is a treat, learn how to cook and make nutritious food at home with someone you love. i would limit a resto meal to once a month, some people eat out 2-3 times a week, add up those bills people that is expensive. who needs expensive designer cloths? you do? expensive for nothing, so stop complaining about your debt if you are doing all of the above. it takes dicipline to be debt free. i just turned 40 and have zero debt, it’s a joke my house cost me 500 month all included, taxes, cable heating everything for a beautiful 2200 square foot home on a quiet street in a nice suburb of montreal. now i have money at age 40 do to whatever i want. vacation, car no problem , but i do want to retire with money in the bank so i still can’t go crazy but i sleep very well at night knowing that everything is paid and food, shelter paying my bills are a piece of cake.

  • KP June 2, 2011, 4:42 pm

    I’ll add my story too, albeit a little late.

    We each owned a home, and sold them to purchase our ‘forever’ home, if things don’t change too greatly. @ 455k in Calgary, and with the downpayments from both our other properties, our mortage was only about 1.5x household income.

    The plan was to make the maximum 20% payments for 4 years and then just let the mortgage payments finish the rest off by the time the 5 year term was up :) – We won’t have to renew. The money for these came out of my husbands company stash, and my taxable investments – we will both still be maxing out our TSFAs and RRSPs during this time frame. This has some opportunity cost to it, but having just been through a layoff cycle in calgary it is well worth the safety it provides. We have intentionally put off having children until our last payment is made, but I’m enjoying a peak fitness level and a few triathlons before I have to go into baby making mode – at 29 years old it’s not too much to wait another year. Expecially knowing that we’ll both be able to work part time through out our child rearing years.

    The plans with our mortgage money once it’s freed up (and while we are still making it) is to put it in a renovation fund, and to pay cash and truly make this our forever home – or to trade up if that becomes more desirable – hopefully remaining mortgage free in the process. OR to work less and be home more.

  • AB July 12, 2011, 11:25 am

    Is it better to increase the payments or to make lump sum paymnents? In which situation you will end up paying less interest.

  • Oli July 12, 2011, 11:53 am

    @AB
    If you can do a lump sum today equivalent to your increased payments for the rest of the year, then do the lump sum today (so you don’t pay interest on on that money anymore).

    If the question is: should I accumulate the money for 12 months and then dump that as a lump sum I say increase your payments… unless you have a GUARANTEED way of making more money on it than your mortgage rate (e.g. if your mortgage is a t 2.25% but you somehow have a 3% rate on a savings account).

  • DANE PRAED April 7, 2012, 8:59 pm

    Congratulations!!! It’s a wonderful feeling isn’t it? :)

    And to everyone else, I highly recommend making a priority of paying off your mortgage asap! Increased payments, accelerated bi-weeklies, lumpsums … they all do wonders!!! We paid off ours in 5 years and immediately downshifted to part-time work. Why spend 5 days at the office when your housing bill has gone? We’re absolutely loving the new more balanced lifestyle. Way too many books to read, podcasts to listen to, and lectures to attend etc and not enough hours in the week if you’re working full-time. It’s amazing what a difference the extra money makes! I can bank one of my two monthly paycheques and not even use all of the second to cover the remaining bills.

  • YoungGun July 20, 2012, 6:13 pm

    I just graduated from University and was lucky enough to land a pretty solid job in Calgary (oil and gas). I have a little bit of student loans to pay off (around $7k) but the monthly payments are quite small. My first priority is to start saving for a down payment because I want to own property as soon as possible. I’m currently living with a room mate in downtown Calgary, approximatley 5 minutes walking distance to work. Because I split with the roommate, I only pay $500/month for my apartment and have sold my parking spot in downtown for a $125/month profit. After paying all my bills and budgeting for all my necessities, Im saving close to $2k/month. Ideally, I want to save up for a down payment on a condo or apartment close to (not necessarily inside) downtown. How long do you think this will take me ? How much of a down payment should I aim at ? Looking at condo prices today, I am seeing anywhere from $250k-$350k for a decent place. What should i do with that $2k/month that I have left over to speed up the saving process? Any tips would be much appreciated. Thanks !

  • Michael Kohn August 11, 2012, 5:26 pm

    I’ve recently signed for a 15-y mortgage but I want to pay off it in seven years.
    Your tips will surely helps me!

  • maT September 6, 2014, 11:41 am

    How in the hell do you get a mortgage that is worth 2 times your salary in the economy? I make 80k can’t buy a house that isn’t crap. For that amount in saskatchewan

    • FrugalTrader FrugalTrader September 6, 2014, 2:07 pm

      @Mat, Remember it’s 2 x the mortgage, not 2 x the house value. What we did was save a larger down payment.

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