Getting Mortgage-Free Faster

All of us dream of retiring at a reasonable age with sufficient savings, a paid off mortgage and no debt so that we can enjoy the fruits of our earlier years’ hard work. Is this a reality today?

Unfortunately, rapidly increasing house prices, mortgage sizes, the cost of living, lifestyle pressures and our busy lives have caused the majority of people to either give up or not even consider being mortgage-free by the time they retire. To make the problem worse, financial institutions are not incentivized to help their clients become mortgage-free; instead, these institutions’ profitability depends on their borrowers being indebted for longer.

Most of us believe that we are able to manage our finances and be mortgage-free faster, but we often forget that money matters are hard, intimidating and require a long-term approach. Because it is hard and intimidating to stare at a large mortgage, put a plan together to pay it off and stick to that plan, most tend to surrender the problem to their financial institution against their better judgement. We would all like help with our finances, but it is nearly impossible to know where to go for unbiased help or whose advice to trust. 
So, who does a borrower turn to for help and advice with faith that they will receive real help and they won’t just be sold another “miracle” financial product that will not solve their problems, but instead tie them up even deeper or longer financially? 
We wish you could buy your home outright, without a mortgage, but today that is nearly impossible for the majority of urban living Canadians. So, since you may need a mortgage to buy a home, you need to consider the mortgage-free lessons that we have learned from serving and helping great clients like you. 

Mortgage-free myths that became lessons:

Here are five lessons that we have learned that either limit or prohibit clients from paying off their mortgages faster. On the surface they all seem to be positive mortgage-free contributors, but from experience, we have discovered they actually do the complete opposite.

“What is your lowest rate?”

Your mortgage interest rate needs to be competitive, but the life cycle costs of the wrong mortgage can be a lot more expensive and limiting than the effects of an interest rate.  When last did you get the best car when you asked a car dealership for the cheapest car on the lot?  That cheap car will most likely cost you a lot more than its sticker price… Mortgages are no different. 

“I will Google it”  

The internet is amazing; anyone with an internet connection can pretty much find out anything about anything, including how to be mortgage-free faster (or so you think).  A “mortgage-free” Google search returns 583,000,000 results, yet less than 1% of Canadians are mortgage-free faster than their contractual amortization period. 
Why is this?  
It is because information by itself is passive; it is just information and only becomes transformation once consistently acted upon. Just like weight loss and other human behaviour dilemmas, our busy lives make it very hard to take consistent action on even vital, potentially life changing information. 

“I can do it myself.”  

We sure are capable of managing our finances by ourselves, however, our busy, demanding lives often distract us from focusing on what is most important to us. E.g. our finances. It is fairly easy for us to pay our mortgages off faster, but distractions make it even easier not to pay our mortgages off faster. We have seen many more successful mortgage-free plans from clients who have used help to pay off their mortgages. 

“I am going to pay off my mortgage in ‘X’ years”

As much as we love great and ambitious mortgage-free plans, they are often unrealistic and end up abandoned or causing more financial damaged than they do good. Idealistic mortgage-free plans can limit you financially if you retire mortgage-free, but without sufficient savings to see you through your retirement. We believe that your mortgage-free plans need to be realistic, achievable and not limit your overall future, financial plans.  

“I want my mortgage to be with [fill in the financial institution’s name]”  

Choosing a mortgage lender just because of its brand name can not only cause you financial loss, but the lender can make it almost impossible for you to take your mortgage elsewhere and it can it can also significantly limit your mortgage-free plans. 

Real mortgage-free plans that work:

Now that we know at least five mortgage-free myths, let’s look at some factors that give you a lot better probability to be mortgage-free faster.

A normal, principal & interest, mortgage will give you a better chance to be mortgage-free faster. We understand that some clients may need more complex products, such as a Home Equity Line of Credit [HELOC] for example, however, it is important to note that complex mortgage products are significant contributors to increased mortgage debt. Try your best to rely on your own savings for a rainy-day fund instead of the debt from a HELOC. 

A low, competitive, interest rate is essential to your mortgage-free plans, but the right mortgage product with the right features can not only avoid costs, but it can help you to save more money over the life of the mortgage than an unsuitable mortgage product with a slightly reduced interest rate. Remember, the mortgage product you choose upfront not only has cost and other implications during your mortgage term, but it also largely pre-determines your mortgage rate, options and limitations of your next mortgage when you have to renew your existing mortgage at the end of your mortgage term. 

Mortgage lenders that allow us to serve you and facilitate your mortgage-free plans throughout the life of your mortgage, give you a much higher chance to be mortgage-free faster.

Don’t just let your mortgage run its normal course and equally don’t wreck your finances to drive down your mortgage. A realistic, consistently executed plan is always better than an ambitious, idealistic, unachievable plan that does not work. Speak to your financial planner to make sure your mortgage-free plans don’t clash with the rest of your financial plans. 

Here are ways that we have seen our mortgage-free clients win:

They increase their mortgage payments with consistent, small amounts, every year, for the life of their mortgage. E.g. $100/payment, each year. These increases may seem insignificant, but it is essential that they remain realistic, otherwise the best plans are abandoned if they ruin your budget. Large, lump sum contributions are ideal for paying your mortgage down faster, however very few people have the discipline to make inconsistent, additional payments to their mortgage, so these plans end up as intentions only. 

Their plans require few changes and limited interaction. We recommend you re-visit your mortgage-free plans once a year, just before the anniversary date, and make any changes to the plan then only. This means that you only have to make four mortgage-free decisions during a five-year mortgage term. 

They ask for help. There are reasons why most successful people achieve their goals… They ask for help even though they, themselves are very capable people. How much more successful do you believe your mortgage-free plans would be if we prompt you when it is time to revisit your mortgage-free plans and then we even make your mortgage payment changes on your behalf?