Mortgages are the banks biggest money-making machines regardless of the interest rate and you must pay it off by the time you retire.  In fact, all debt should have an “end date” which should match up to the day you plan to do your hard-stop to working.

The best way to ensure you pay off your mortgage by retirement, is to line up the amortization with that year.  So, for example, if you are 40 years old and plan to retire at 60, you would not put your mortgage amortization longer than 20 years.  And, if you plan to do any refinancing into that mortgage, the amortization must always stay within the allotted years until you retire.  I know this will make the payments higher – but you do want to get rid of it, right?

Here are some other ways to pay off your mortgage faster:

1. Make lump sum payments on the anniversary of the loan every year.
2. Increase your payment amount and reduce the overall amortization.
3. Choose weekly payments over monthly.
4. Choose accelerated payments over regular payments.
5. Maximize the prepayment privileges with your lender.

Christine’s Tip:

When it comes to planning, most people are unsure and sometimes overwhelmed with how to tackle their finances and eliminate debt.  The media and large financial institutions have done an excellent job convincing us that our mortgage should be paid over the standard twenty-five-year amortization and have ensured we stay in debt by allowing us to acquire more credit in the form of credit cards, lines of credit and personal loans. 

Home renovations, buyouts on car loans and leases, credit card debt and family vacations are just some of the things most people will consolidate into their mortgage.  Banks are more than happy to help ease your worries about debt by providing you with a larger mortgage and extending the amortization out to make the monthly payment feel manageable.  We have developed the habit of sweeping the debt, “not under the rug” but into our mortgage.  Please try to stop this habit – you must be debt free by the time you retire.