June 8, 2024 • 16 mins
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EPISODE DESCRIPTION
In this episode, Tom shares 5 key strategies on how to pay down your mortgage quicker, while also having benefits like saving on interest and eliminating consumer debt.
What was discussed: → Explaining different methods of pre-payment privileges including accelerated and lump sum payments. → Paying off your high interest debt to increase cash flow and refinancing your mortgage. → Why you should be looking at a static variable rate mortgage in a declining rate environment.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
the increase to interest ratesover the last couple of years,
inflation creeping up, and yourmortgage payment just being
overall higher, it's never beenharder to live here in Canada.
Now, with that being said, payingdown your mortgage can be a great
way to lower your payment comerenewal time, and really just a
peace of mind knowing that youdon't have that big chunk of
payment coming out every singlemonth.
So in this video, I'm going totake you through five key
strategies on how to pay down yourmortgage quicker.
(00:21):
And in case you're wondering who Iam, my name is Tom Moffitt.
I'm a mortgage broker here inCanada.
I've helped hundreds of clients doexactly what I'm about to show you
here today.
So with that being said, let's
dive right into it with are a wayto really just pay down your
mortgage quicker on autopilot,because it's something that you
set up originally when you getyour mortgage.
And it's something you reallydon't really have to think about
(00:43):
during the term of your mortgage.
So how it works is when you get
your new mortgage, you have theoption of selecting either
monthly, semi-monthly, weekly, orbi-weekly payments.
Now accelerated versusnon-accelerated is really where
it's going to make that differencein paying down the mortgage
quicker.
A lot of misconception out there
is people think that by selectingweekly or bi-weekly payments,
that's going to pay down themortgage quicker.
When in reality, the only way itdoes is if you actually select the
(01:07):
accelerated payments thataccompany that payment.
So you can't have acceleratedpayments for a monthly or
semi-monthly payment, but withweekly and bi-weekly, you can opt
into that accelerated payment.
Okay.
So what we're looking at is atable outlining a 500k mortgage
throughout a five-year term.
So on the left-hand column, we
have bi-weekly non-acceleratedpayments.
On the right-hand column, we havebi-weekly accelerated payments.
So you can see the difference fromthe payment amount there.
(01:29):
We have $1299 versus $1409.
So the way bi-weekly accelerated
payments work or weekly for thatmatter, is that when you opt into
that payment, you're actuallypaying more towards the mortgage.
Obviously, that's how you'repaying it down quicker.
So that payment's actually goingto be slightly higher.
So the first thing you want tolook at is the payment difference
and make sure that you can affordthe higher payment because it is
(01:52):
going to be a higher payment.
And of course, the higher mortgage
amount you have, the higher thatpayment's going to be.
The next row we have down below isthe interest paid.
So we have $130,887 on thebi-weekly non-accelerated column.
And with bi-weekly acceleratedpayments, we're actually paying
less, $128,776.
So that's a difference of $2,110,
as you can see with the row downbelow.
The really fun part comes with thenext two rows here.
So we have principal paid on thebi-weekly non-accelerated, we have
(02:14):
$38,078.
But with the bi-weekly
accelerated, we're paying $54,491towards the principal.
So that's a pretty big differencethere.
And the result of that is we'resaving three years off of your
mortgage throughout that five-yearterm.
So just by opting into somethingthat's on autopilot, you don't
have to think about it.
Yes, your payment's going to be
(02:35):
slightly higher, but make sure youcan afford that payment.
You're shaving off three years ofyour mortgage after that five-year
term.
So with accelerated payments, it's
one strategy you can use that arepart of your prepayment
privileges.
So every mortgage, you have a set
term, set guideline as to how muchyou can prepay your mortgage.
And that's through what's calledprepayment privileges.
So I have other videos that goover that in detail.
But just to keep it simple, justknow that we have two different
(02:58):
ways to pay down the mortgageusing those prepayment privileges.
And the first way is acceleratedpayments.
The second way, which I'm about todive into now, is through lump sum
payments.
So with every lender, you have
different percentages as to howmuch you can put down towards the
mortgage on an annual basis.
There's different caveats to that,
like how often you can do itthroughout the year.
But again, just to keep it simple,I'm going to break down the effect
(03:20):
a lump sum payment has towardsyour mortgage and how aggressively
you can pay it down.
So in this example, we're going to
use that 500k mortgage just likewe used earlier, five year term
and a 5.5% rate.
Doesn't matter what rate it is for
today, we're going to use that5.5.
Of course, the higher the rate,then the more savings you're going
to have on that interest.
But that's kind of where things
are at right now for interestrates.
So we're going to use a 5.5.
(03:42):
So you'll see the year on the left
hand column, on the right handcolumn, we have the payment
amount.
And I'm going to keep it simple.
We're going to do $10,000 everyyear for that five-year term.
Now, keep in mind, you're not seton just putting $10,000.
You can put less, you can puthigher.
It depends on the prepaymentprivileges that you have set out
with that lender.
So again, like I talked about, you
can have either 10%, 15%, or 20%prepayment privilege.
(04:02):
Those are the standards withlenders.
you're Hopefully, on the higherclose to that side, because it
just 20%, Those privilege.
are the standards with Hopefully
lenders.
you're on the higher side, close
to that 20% because it just opensup the door to put more money
down.
Even if we use a small amount of
$10,000, this is still verypowerful.
So I'll explain that with thenumbers here.
So let's dive right into it.
The first number we're going to
(04:24):
look at is the interest saved overthe term.
So because we're putting thatmoney down, we're going to save on
some interest.
So that's going to amount to
$7,402.
Not bad, only over a five-year
term.
Years shaved, we have five years,
seven months.
So that's the number I like to
look at because again, the wholepoint of this video is to show you
how to pay down the mortgage.
The interest saved over the term
is kind of the cherry on top.
The mortgage free is the ultimate
goal.
So five years and seven months,
you're kind of looking at like ayear that you're shaving per year
(04:47):
of the term.
So not too shabby.
If you continue to do this samemodel and putting $10,000 towards
the mortgage on an annual basis,then this can save you, this is a
really cool interest number here,$140,910.
That is some crazy amount ofsavings.
And that's if you were to continuedoing this until you pay off your
mortgage.
So that's lump sum payments.
Again, as a reminder, we have twodifferent ways.
I believe earlier in the video, Imentioned accelerated payments was
(05:07):
one way that you can use yourprepayment privileges.
That's actually aside from yourprepayment privileges.
So I'm sorry, I made that mistake.
It's actually, you have two
different facets of using yourprepayment privileges.
You have your first way of lumpsum payments, which we just went
through.
And the second way is to increase
your payments.
So not to confuse with accelerated
payments, that's separate.
You can increase the payment up to
(05:30):
a certain amount with the lender.
So again, going back to that 10,
15, or 20%, that is going to bealigned usually with that lender.
So it's either going to be a 10,15, or 20%.
Some lenders go up to 100% for theincreased payment.
So if you have questions on that,or you have a specific lender that
you would like me to answer on interms of prepayment privileges,
(05:50):
comment here down below and I cangive you an accurate number there.
So now you might be thinking,okay, cool.
That's great, Tom.
But how do I actually have that
$10,000 towards my mortgage?I'm already kind of tight on cash
and I don't really have the luxuryof putting extra money towards my
mortgage.
Well, although that's true,
everyone's situation is different.
I can only speak to my experience
and how I do this personally.
(06:11):
So one thing that I've been doing
as of late, I would say maybe forthe past six months, let's say I
wanted to go out and buy sometakeout for the night.
So let's call that $50 for myfamily and I, maybe it's much more
with inflation, but let's just use$50 as an example.
So that $50, instead of buyingtakeout, maybe I decide, you know
what, we have some things at home,let's just cook instead and not be
so lazy and just buy that takeoutand spend some quality family time
(06:34):
cooking a meal together.
Whatever the case is, if you can
save that $50, what I'm doing isI'm putting that $50 into a
savings account.
And then by the end of every
month, whatever's accumulated, I'mputting that straight towards my
mortgage.
So yes, it sounds simple.
But if you can really think aboutthe different times in your day to
day, where you're putting moneytowards something that you can
really cut down on, this does addup.
(06:54):
And by the time you know it, bythe end of the year, you might be
close to that $10,000.
So strategy number three, pay off
some high interest debt.
Now there's different ways to do
this, but I'm going to use anexample of pulling out equity from
your home and paying off that highinterest debt, which is going to
free up some cashflow to then putthat cashflow towards your
mortgage.
So yes, it sounds
(07:15):
counterintuitive.
You're taking out a higher
mortgage amount.
You're increasing your mortgage
size, but it's for a reason.
If you have a plan in place, this
can skyrocket the amount of timeit's going to take to pay off your
mortgage.
I'm going to go through an example
of taking out equity in your home,paying down that debt and using
that savings towards yourmortgage.
And over time, as long as youstick to the game plan, this can
be very effective.
(07:35):
So what we're going to do is we're
going to look at our amortizationremaining.
So this is the length of yourmortgage, and we're going to
assume we have 25 years left onthe life of your mortgage.
Then we're going to go down hereto interest rate.
This isn't really all tooimportant in this example, but we
have to set the interest ratehere.
So let's say you have 4% interestrate.
So it's lower than what we can gettoday.
This example still makes sense todo this.
(07:56):
So what we're going to do is we'regoing to take that current
mortgage balance of 500,000.
We're going to have the monthly
mortgage payment on that.
This is what you're paying right
now, $2,630.
We have some debts that we want to
pay off.
And that's the whole reason why
we're looking at this strategy.
So if you're sitting there
thinking like, hey, you know what,I don't have too many debts, this
can still work with like a carloan.
As an example, the payment on yourcar loan could be quite high.
(08:19):
In some cases, if you consolidatethat car loan and put it into your
mortgage, you can lower thatpayment.
And that's what we're doing here.
We're going to tie up the car
loan, we're going to tie up theunsecured line of credit debt.
Typically, they're up around 11 to13% for unsecured line of credit
debt.
Typically, they're up around 11%
to 13% for unsecured line ofcredit.
That's the rates on them.
Pretty high, not as high as credit
cards at 19%, but the mortgagerate is going to be much lower.
(08:40):
And that's what we're doing here.
We're going to tie up that high
interest debt.
We're going to assume you have a
balance of $30,000 there, whichisn't unrealistic.
We have a lot of clients that arein these situations, and it's not
to their detriment, their fault.
It's just how things are right
now.
So we have an unsecured line of
credit at $30,000.
Our Visa card, 19% interest rate
at 22,000.
So adding all those up, we have a
total balance of 92,000.
So if you look at the monthly
(09:02):
payments on that, we have a totalof $1,273.
So if we add that payment withmortgage payment, we have a total
household payment at $3,903.
So now what we're going to do is
we're going to look intorefinancing the mortgage.
That's when we restructure it.
We take out some equity, we
increase the mortgage amount, andwe tie up some of that high
interest debt.
When you refinance your mortgage,
you have the option to go up to a30-year amortization.
In some cases, we can stretch thatfurther, but we're typically
looking at alternative So we'rejust looking at an A lender,
(09:24):
lenders.
so typical bank.
We can go to a 30-yearamortization.
So that's going to lower thepayments.
And let's just say we have anannual mortgage rate at 5.5%.
This is going to fluctuatedepending on where rates are at at
the time.
But as you can see, we're going to
1.5% higher on the interest rateand still going to make sense.
We have a total mortgage amount at$592.
We have monthly mortgage paymentat $3338.
(09:46):
So $3,338.
As you can see down here, now it's
nice.
We're starting on a blank slate
here.
We've got all of our debts paid
off.
So $0 balance on all of them.
There's no payment on them.
The total household payment now
becomes $3,338.
So you can see total savings are
$564.
So that's a win right away.
The mortgage amount is increasing.
(10:08):
Yes, $92,000.
So it's quite a bit, but we'refreeing up some cashflow.
So now what we're going to do iswe're going to take that cashflow
savings of $564.
We're going to put that into a
different account.
Like I said, with the last
strategy, we're going to put thatinto a savings account.
We're going to be responsible andnot dip into that.
We're going to take that $564, addit up over the year, which is
going to accumulate to $6,777.
We're going to put that towards
the mortgage using our lump sumpayments.
(10:30):
And here's the result.
So we're going to shave off eight
years and 10 months.
So pretty significant.
And now you're thinking, well,Hey, Tom, you added five years to
the mortgage.
Yes, that's true.
So let's just take that intoaccount.
We're shaving off eight years, 10months.
We've increased the mortgage byfive years.
So the net year shaved, we'reactually at three years, 10 months
(10:51):
ahead.
So we're ahead by that time.
So the bonus on this too, is wehave some interest savings.
Like we're saving on interest herefrom the 11 and 19% versus the
five and a half here.
So there's a win in both sides of
the column.
You just kind of have to open up
your mind here.
And this situation isn't for
everyone, but if you are in thistype of situation, please feel
free to reach out.
The link down in the description
(11:12):
is to book a call with ourselvesand we can look at a customized
game plan for you just like thisone here.
And strategy number four, increaseyour income.
Now, this is actually my personalfavorite.
And the reason being is because Ihave personal experience in this
boat, because I, like many others,were kind of penny pinching,
saving across the board and justtrying to accumulate as much
(11:33):
savings as possible to put downtowards the mortgage.
But then I think it was a coupleof YouTube videos, ironically,
that I started watching and Irealized maybe there's other
opportunities to open up my mindand increase my revenue sources.
So in my opinion, you really havetwo different options on how to
increase your income.
So the first way is just by doing
it through your job.
So whether you get a job raise or
you move up to a new positionwithin the company, that's a way
(11:54):
you can increase your income.
And the second way is by exploring
side hustles.
So that's actually how I got into
the mortgage business was Istarted it as a side hustle
thinking that it would be a greatway part time to do this and make
some good money.
But mistakenly, it's a full time
job.
You cannot do this part time.
In my opinion, there's some othermortgage brokers out there who are
doing it part-time, but I don'tthink it's going to be right for
(12:16):
the consumer because you have tobe fully devoted to it in order to
put the time it takes to buildcustomized strategies for clients,
answer them on time, communicateproperly.
So I quickly realized that when Istarted this as a side gig and
before I got into mortgage space,I was a firefighter.
So completely different out of myBut what zone.
I got into mortgage I was space, afirefighter.
(12:37):
So completely different out of myzone.
But what I'm trying to get mymessage across to you, the
listener is it doesn't have to besomething completely different
than what you're doing.
So if you're, for example, a
teacher, and you want to tutor onthe side, use your skill sets that
you already have.
And look at that avenue first,
because that's going to be theeasiest route to go to increasing
your income is using the sameskill sets you have.
In my example, it was completelydifferent firefighting versus
(12:58):
mortgage brokering, two differentcareers in and of itself.
So luckily, it worked out for me.
I actually excelled at being a
business owner and helping clientswith their mortgage and financing.
And it just so happens I reallyenjoyed doing it.
So here I am today, and my incomehas increased quite significantly.
And that's not to brag.
It's just to show you that it
really does pay no pun intended toexpand outside of your comfort
(13:19):
zone, look at differentdirections.
And that's my favorite way to paydown the mortgage because the more
income you bring in, as long asyou're smart with your money and
you're not spending it on stupidthings, then it's going to be a
lot easier to pay down yourmortgage.
Because if you look at it in thatlast example of using $10,000 a
year towards your mortgage, that'sgoing to be a lot easier to come
by by going into a side gig.
It doesn't have to be that
extreme.
You don't have to quit your job
(13:40):
and go self-employed.
Not saying that.
Maybe it's you go and you be anUber driver and start making $500
to $1,000 a month.
That'll pay for your $10,000 a
year if you do that.
So yes, that's not a strategy that
you are probably expecting in thisvideo, but I'm quite passionate
about it.
And I like to think outside the
box and not just talk about themortgage details because yes,
(14:01):
that's important.
But let's think bigger picture
here.
Consider taking a variable rate
mortgage.
So variable rate mortgages have
had quite a bad rap over the lasttwo to three years.
And it's due to the increase tointerest rates and a lot of people
suffering from that increasedpayment.
A lot of these people that tookvariable rate mortgages back in
the COVID days were right around2%, if not some of them were sub
2%.
So the increase to their rate has
(14:22):
increased their payment quitesignificantly.
But with that being said, what I'mabout to talk about here right now
is a different way to look at it.
And that's because we're in an
environment where we know interestrates are going to decrease within
the next year or so, if notsooner.
We just don't know when or by howmuch, but we know they're not
going to be on the rise.
So one strategy you can use is a
static variable rate mortgage.
So there's two different types of
(14:44):
variables.
You have your static and you have
your adjustable rate mortgage.
The main difference is with a
static variable rate, you have astatic payment as the name
implies.
Your payment is not going to
fluctuate as the prime rate set bythe Bank of Canada.
If they fluctuate or decrease,that payment is not going to
change.
The net rate on the back end is
going to change.
(15:04):
So the benefit to this is your
payment stays the same.
Your rate goes down.
That means your payment is goingto be higher than what your actual
rate reflects.
So that payment is going directly
towards principal, towards yourmortgage.
So it's going to pay down yourmortgage on autopilot.
So much like strategy number one,accelerated payments, you are
accelerating your payment in thatregard, only it's not going to be
using your prepayment privilegesthat we talked about here.
(15:26):
So you're going to have thebenefit of paying down the
mortgage on autopilot prettysignificantly because we are going
to see, say, 1% to 2% decreases inthe near future.
Then that's going to have a prettybig impact on how fast you pay off
your mortgage.
If you want more information on
how the static variable ratemortgage works compared to the
adjustable rate mortgage, checkout this video right here.
the increase to interest ratesover the last couple of years,
inflation creeping up, and yourmortgage payment just being
overall higher, it's never beenharder to live here in Canada.
Now, with that being said, payingdown your mortgage can be a great
way to lower your payment comerenewal time, and really just a
peace of mind knowing that youdon't have that big chunk of
payment coming out every singlemonth.
So in this video, I'm going totake you through five key
strategies on how to pay down yourmortgage quicker.
(00:21):
And in case you're wondering who Iam, my name is Tom Moffitt.
I'm a mortgage broker here inCanada.
I've helped hundreds of clients doexactly what I'm about to show you
here today.
So with that being said, let's
dive right into it with are a wayto really just pay down your
mortgage quicker on autopilot,because it's something that you
set up originally when you getyour mortgage.
And it's something you reallydon't really have to think about
(00:43):
during the term of your mortgage.
So how it works is when you get
your new mortgage, you have theoption of selecting either
monthly, semi-monthly, weekly, orbi-weekly payments.
Now accelerated versusnon-accelerated is really where
it's going to make that differencein paying down the mortgage
quicker.
A lot of misconception out there
is people think that by selectingweekly or bi-weekly payments,
that's going to pay down themortgage quicker.
When in reality, the only way itdoes is if you actually select the
(01:07):
accelerated payments thataccompany that payment.
So you can't have acceleratedpayments for a monthly or
semi-monthly payment, but withweekly and bi-weekly, you can opt
into that accelerated payment.
Okay.
So what we're looking at is atable outlining a 500k mortgage
throughout a five-year term.
So on the left-hand column, we
have bi-weekly non-acceleratedpayments.
On the right-hand column, we havebi-weekly accelerated payments.
So you can see the difference fromthe payment amount there.
(01:29):
We have $1299 versus $1409.
So the way bi-weekly accelerated
payments work or weekly for thatmatter, is that when you opt into
that payment, you're actuallypaying more towards the mortgage.
Obviously, that's how you'repaying it down quicker.
So that payment's actually goingto be slightly higher.
So the first thing you want tolook at is the payment difference
and make sure that you can affordthe higher payment because it is
(01:52):
going to be a higher payment.
And of course, the higher mortgage
amount you have, the higher thatpayment's going to be.
The next row we have down below isthe interest paid.
So we have $130,887 on thebi-weekly non-accelerated column.
And with bi-weekly acceleratedpayments, we're actually paying
less, $128,776.
So that's a difference of $2,110,
as you can see with the row downbelow.
The really fun part comes with thenext two rows here.
So we have principal paid on thebi-weekly non-accelerated, we have
(02:14):
$38,078.
But with the bi-weekly
accelerated, we're paying $54,491towards the principal.
So that's a pretty big differencethere.
And the result of that is we'resaving three years off of your
mortgage throughout that five-yearterm.
So just by opting into somethingthat's on autopilot, you don't
have to think about it.
Yes, your payment's going to be
(02:35):
slightly higher, but make sure youcan afford that payment.
You're shaving off three years ofyour mortgage after that five-year
term.
So with accelerated payments, it's
one strategy you can use that arepart of your prepayment
privileges.
So every mortgage, you have a set
term, set guideline as to how muchyou can prepay your mortgage.
And that's through what's calledprepayment privileges.
So I have other videos that goover that in detail.
But just to keep it simple, justknow that we have two different
(02:58):
ways to pay down the mortgageusing those prepayment privileges.
And the first way is acceleratedpayments.
The second way, which I'm about todive into now, is through lump sum
payments.
So with every lender, you have
different percentages as to howmuch you can put down towards the
mortgage on an annual basis.
There's different caveats to that,
like how often you can do itthroughout the year.
But again, just to keep it simple,I'm going to break down the effect
(03:20):
a lump sum payment has towardsyour mortgage and how aggressively
you can pay it down.
So in this example, we're going to
use that 500k mortgage just likewe used earlier, five year term
and a 5.5% rate.
Doesn't matter what rate it is for
today, we're going to use that5.5.
Of course, the higher the rate,then the more savings you're going
to have on that interest.
But that's kind of where things
are at right now for interestrates.
So we're going to use a 5.5.
(03:42):
So you'll see the year on the left
hand column, on the right handcolumn, we have the payment
amount.
And I'm going to keep it simple.
We're going to do $10,000 everyyear for that five-year term.
Now, keep in mind, you're not seton just putting $10,000.
You can put less, you can puthigher.
It depends on the prepaymentprivileges that you have set out
with that lender.
So again, like I talked about, you
can have either 10%, 15%, or 20%prepayment privilege.
(04:02):
Those are the standards withlenders.
you're Hopefully, on the higherclose to that side, because it
just 20%, Those privilege.
are the standards with Hopefully
lenders.
you're on the higher side, close
to that 20% because it just opensup the door to put more money
down.
Even if we use a small amount of
$10,000, this is still verypowerful.
So I'll explain that with thenumbers here.
So let's dive right into it.
The first number we're going to
(04:24):
look at is the interest saved overthe term.
So because we're putting thatmoney down, we're going to save on
some interest.
So that's going to amount to
$7,402.
Not bad, only over a five-year
term.
Years shaved, we have five years,
seven months.
So that's the number I like to
look at because again, the wholepoint of this video is to show you
how to pay down the mortgage.
The interest saved over the term
is kind of the cherry on top.
The mortgage free is the ultimate
goal.
So five years and seven months,
you're kind of looking at like ayear that you're shaving per year
(04:47):
of the term.
So not too shabby.
If you continue to do this samemodel and putting $10,000 towards
the mortgage on an annual basis,then this can save you, this is a
really cool interest number here,$140,910.
That is some crazy amount ofsavings.
And that's if you were to continuedoing this until you pay off your
mortgage.
So that's lump sum payments.
Again, as a reminder, we have twodifferent ways.
I believe earlier in the video, Imentioned accelerated payments was
(05:07):
one way that you can use yourprepayment privileges.
That's actually aside from yourprepayment privileges.
So I'm sorry, I made that mistake.
It's actually, you have two
different facets of using yourprepayment privileges.
You have your first way of lumpsum payments, which we just went
through.
And the second way is to increase
your payments.
So not to confuse with accelerated
payments, that's separate.
You can increase the payment up to
(05:30):
a certain amount with the lender.
So again, going back to that 10,
15, or 20%, that is going to bealigned usually with that lender.
So it's either going to be a 10,15, or 20%.
Some lenders go up to 100% for theincreased payment.
So if you have questions on that,or you have a specific lender that
you would like me to answer on interms of prepayment privileges,
(05:50):
comment here down below and I cangive you an accurate number there.
So now you might be thinking,okay, cool.
That's great, Tom.
But how do I actually have that
$10,000 towards my mortgage?I'm already kind of tight on cash
and I don't really have the luxuryof putting extra money towards my
mortgage.
Well, although that's true,
everyone's situation is different.
I can only speak to my experience
and how I do this personally.
(06:11):
So one thing that I've been doing
as of late, I would say maybe forthe past six months, let's say I
wanted to go out and buy sometakeout for the night.
So let's call that $50 for myfamily and I, maybe it's much more
with inflation, but let's just use$50 as an example.
So that $50, instead of buyingtakeout, maybe I decide, you know
what, we have some things at home,let's just cook instead and not be
so lazy and just buy that takeoutand spend some quality family time
(06:34):
cooking a meal together.
Whatever the case is, if you can
save that $50, what I'm doing isI'm putting that $50 into a
savings account.
And then by the end of every
month, whatever's accumulated, I'mputting that straight towards my
mortgage.
So yes, it sounds simple.
But if you can really think aboutthe different times in your day to
day, where you're putting moneytowards something that you can
really cut down on, this does addup.
(06:54):
And by the time you know it, bythe end of the year, you might be
close to that $10,000.
So strategy number three, pay off
some high interest debt.
Now there's different ways to do
this, but I'm going to use anexample of pulling out equity from
your home and paying off that highinterest debt, which is going to
free up some cashflow to then putthat cashflow towards your
mortgage.
So yes, it sounds
(07:15):
counterintuitive.
You're taking out a higher
mortgage amount.
You're increasing your mortgage
size, but it's for a reason.
If you have a plan in place, this
can skyrocket the amount of timeit's going to take to pay off your
mortgage.
I'm going to go through an example
of taking out equity in your home,paying down that debt and using
that savings towards yourmortgage.
And over time, as long as youstick to the game plan, this can
be very effective.
(07:35):
So what we're going to do is we're
going to look at our amortizationremaining.
So this is the length of yourmortgage, and we're going to
assume we have 25 years left onthe life of your mortgage.
Then we're going to go down hereto interest rate.
This isn't really all tooimportant in this example, but we
have to set the interest ratehere.
So let's say you have 4% interestrate.
So it's lower than what we can gettoday.
This example still makes sense todo this.
(07:56):
So what we're going to do is we'regoing to take that current
mortgage balance of 500,000.
We're going to have the monthly
mortgage payment on that.
This is what you're paying right
now, $2,630.
We have some debts that we want to
pay off.
And that's the whole reason why
we're looking at this strategy.
So if you're sitting there
thinking like, hey, you know what,I don't have too many debts, this
can still work with like a carloan.
As an example, the payment on yourcar loan could be quite high.
(08:19):
In some cases, if you consolidatethat car loan and put it into your
mortgage, you can lower thatpayment.
And that's what we're doing here.
We're going to tie up the car
loan, we're going to tie up theunsecured line of credit debt.
Typically, they're up around 11 to13% for unsecured line of credit
debt.
Typically, they're up around 11%
to 13% for unsecured line ofcredit.
That's the rates on them.
Pretty high, not as high as credit
cards at 19%, but the mortgagerate is going to be much lower.
(08:40):
And that's what we're doing here.
We're going to tie up that high
interest debt.
We're going to assume you have a
balance of $30,000 there, whichisn't unrealistic.
We have a lot of clients that arein these situations, and it's not
to their detriment, their fault.
It's just how things are right
now.
So we have an unsecured line of
credit at $30,000.
Our Visa card, 19% interest rate
at 22,000.
So adding all those up, we have a
total balance of 92,000.
So if you look at the monthly
(09:02):
payments on that, we have a totalof $1,273.
So if we add that payment withmortgage payment, we have a total
household payment at $3,903.
So now what we're going to do is
we're going to look intorefinancing the mortgage.
That's when we restructure it.
We take out some equity, we
increase the mortgage amount, andwe tie up some of that high
interest debt.
When you refinance your mortgage,
you have the option to go up to a30-year amortization.
In some cases, we can stretch thatfurther, but we're typically
looking at alternative So we'rejust looking at an A lender,
(09:24):
lenders.
so typical bank.
We can go to a 30-yearamortization.
So that's going to lower thepayments.
And let's just say we have anannual mortgage rate at 5.5%.
This is going to fluctuatedepending on where rates are at at
the time.
But as you can see, we're going to
1.5% higher on the interest rateand still going to make sense.
We have a total mortgage amount at$592.
We have monthly mortgage paymentat $3338.
(09:46):
So $3,338.
As you can see down here, now it's
nice.
We're starting on a blank slate
here.
We've got all of our debts paid
off.
So $0 balance on all of them.
There's no payment on them.
The total household payment now
becomes $3,338.
So you can see total savings are
$564.
So that's a win right away.
The mortgage amount is increasing.
(10:08):
Yes, $92,000.
So it's quite a bit, but we'refreeing up some cashflow.
So now what we're going to do iswe're going to take that cashflow
savings of $564.
We're going to put that into a
different account.
Like I said, with the last
strategy, we're going to put thatinto a savings account.
We're going to be responsible andnot dip into that.
We're going to take that $564, addit up over the year, which is
going to accumulate to $6,777.
We're going to put that towards
the mortgage using our lump sumpayments.
(10:30):
And here's the result.
So we're going to shave off eight
years and 10 months.
So pretty significant.
And now you're thinking, well,Hey, Tom, you added five years to
the mortgage.
Yes, that's true.
So let's just take that intoaccount.
We're shaving off eight years, 10months.
We've increased the mortgage byfive years.
So the net year shaved, we'reactually at three years, 10 months
(10:51):
ahead.
So we're ahead by that time.
So the bonus on this too, is wehave some interest savings.
Like we're saving on interest herefrom the 11 and 19% versus the
five and a half here.
So there's a win in both sides of
the column.
You just kind of have to open up
your mind here.
And this situation isn't for
everyone, but if you are in thistype of situation, please feel
free to reach out.
The link down in the description
(11:12):
is to book a call with ourselvesand we can look at a customized
game plan for you just like thisone here.
And strategy number four, increaseyour income.
Now, this is actually my personalfavorite.
And the reason being is because Ihave personal experience in this
boat, because I, like many others,were kind of penny pinching,
saving across the board and justtrying to accumulate as much
(11:33):
savings as possible to put downtowards the mortgage.
But then I think it was a coupleof YouTube videos, ironically,
that I started watching and Irealized maybe there's other
opportunities to open up my mindand increase my revenue sources.
So in my opinion, you really havetwo different options on how to
increase your income.
So the first way is just by doing
it through your job.
So whether you get a job raise or
you move up to a new positionwithin the company, that's a way
(11:54):
you can increase your income.
And the second way is by exploring
side hustles.
So that's actually how I got into
the mortgage business was Istarted it as a side hustle
thinking that it would be a greatway part time to do this and make
some good money.
But mistakenly, it's a full time
job.
You cannot do this part time.
In my opinion, there's some othermortgage brokers out there who are
doing it part-time, but I don'tthink it's going to be right for
(12:16):
the consumer because you have tobe fully devoted to it in order to
put the time it takes to buildcustomized strategies for clients,
answer them on time, communicateproperly.
So I quickly realized that when Istarted this as a side gig and
before I got into mortgage space,I was a firefighter.
So completely different out of myBut what zone.
I got into mortgage I was space, afirefighter.
(12:37):
So completely different out of myzone.
But what I'm trying to get mymessage across to you, the
listener is it doesn't have to besomething completely different
than what you're doing.
So if you're, for example, a
teacher, and you want to tutor onthe side, use your skill sets that
you already have.
And look at that avenue first,
because that's going to be theeasiest route to go to increasing
your income is using the sameskill sets you have.
In my example, it was completelydifferent firefighting versus
(12:58):
mortgage brokering, two differentcareers in and of itself.
So luckily, it worked out for me.
I actually excelled at being a
business owner and helping clientswith their mortgage and financing.
And it just so happens I reallyenjoyed doing it.
So here I am today, and my incomehas increased quite significantly.
And that's not to brag.
It's just to show you that it
really does pay no pun intended toexpand outside of your comfort
(13:19):
zone, look at differentdirections.
And that's my favorite way to paydown the mortgage because the more
income you bring in, as long asyou're smart with your money and
you're not spending it on stupidthings, then it's going to be a
lot easier to pay down yourmortgage.
Because if you look at it in thatlast example of using $10,000 a
year towards your mortgage, that'sgoing to be a lot easier to come
by by going into a side gig.
It doesn't have to be that
extreme.
You don't have to quit your job
(13:40):
and go self-employed.
Not saying that.
Maybe it's you go and you be anUber driver and start making $500
to $1,000 a month.
That'll pay for your $10,000 a
year if you do that.
So yes, that's not a strategy that
you are probably expecting in thisvideo, but I'm quite passionate
about it.
And I like to think outside the
box and not just talk about themortgage details because yes,
(14:01):
that's important.
But let's think bigger picture
here.
Consider taking a variable rate
mortgage.
So variable rate mortgages have
had quite a bad rap over the lasttwo to three years.
And it's due to the increase tointerest rates and a lot of people
suffering from that increasedpayment.
A lot of these people that tookvariable rate mortgages back in
the COVID days were right around2%, if not some of them were sub
2%.
So the increase to their rate has
(14:22):
increased their payment quitesignificantly.
But with that being said, what I'mabout to talk about here right now
is a different way to look at it.
And that's because we're in an
environment where we know interestrates are going to decrease within
the next year or so, if notsooner.
We just don't know when or by howmuch, but we know they're not
going to be on the rise.
So one strategy you can use is a
static variable rate mortgage.
So there's two different types of
(14:44):
variables.
You have your static and you have
your adjustable rate mortgage.
The main difference is with a
static variable rate, you have astatic payment as the name
implies.
Your payment is not going to
fluctuate as the prime rate set bythe Bank of Canada.
If they fluctuate or decrease,that payment is not going to
change.
The net rate on the back end is
going to change.
(15:04):
So the benefit to this is your
payment stays the same.
Your rate goes down.
That means your payment is goingto be higher than what your actual
rate reflects.
So that payment is going directly
towards principal, towards yourmortgage.
So it's going to pay down yourmortgage on autopilot.
So much like strategy number one,accelerated payments, you are
accelerating your payment in thatregard, only it's not going to be
using your prepayment privilegesthat we talked about here.
(15:26):
So you're going to have thebenefit of paying down the
mortgage on autopilot prettysignificantly because we are going
to see, say, 1% to 2% decreases inthe near future.
Then that's going to have a prettybig impact on how fast you pay off
your mortgage.
If you want more information on
how the static variable ratemortgage works compared to the
adjustable rate mortgage, checkout this video right here.
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