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How Quickly Should I Be Paying Down My Mortgage?

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The last thing you want to think about after you’ve taken the plunge and bought a home is how quickly you should be paying back your mortgage. But if you want to be smart, you should be thinking about that even before the ink is dry. As a mortgage broker in Victoria BC, I get asked this question all the time. My answer to anyone is to always consider the pros and cons of both and to list the potential benefits before you make a decision.
 
Because each situation is different, it’s important to look at the different variables that may provide more insight into how fast you should be paying back your mortgage. I want to explore the types of situations where you may want to be more aggressive with payments or slow it down.
 
Paying Your Mortgage Fast
If you have a mortgage with a high-interest rate, it may be worth your while to start paying your mortgage off fast. If you make any additional payments on top of your monthly payment, it will go towards reducing your principal. This puts you in a better negotiating position when it comes time to refinance. If you have access to a Home Equity Line of Credit too, then paying off your mortgage faster may make more sense to you as you always have access to emergency funds, if needed. If you are the type of person who doesn’t like to invest in stocks and bonds, then paying off your mortgage may be the best option as there is no risk.
 
Paying Off Your Mortgage Slowly
If you were lucky enough to obtain a mortgage with a very low-interest rate, then rushing to pay it back may not make the most sense. In fact, you should probably take advantage of that. If you’re using the home as a rental property then consider taking your time, as well. Because some of the interest is tax deductible, paying it back slower may be more lucrative. If you find another investment that can garner a better return, then paying off your current low-interest mortgage may be something you want to put on the back burner so you can use the money elsewhere.
 
How Do You Decide?
How you spend your money is all about your own priorities. If you are a salaried employee who just got a promotion and can afford to increase your payments which can go towards the principal, then maybe you’ll want to use the extra funds to pay off the mortgage faster. If you received a great year-end bonus and want to make a lump sum payment towards the principal that’s also an option. These might be ideas to get the mortgage paid off faster, but remember, you purchased the home to enjoy it and live your life. If you’re sitting in that home with next to no money, not able to enjoy it, then perhaps you should rethink the speed at which you’re paying it off.
 
Before you make a decision on what you want to do, make sure you seek advice from a professional. As a mortgage broker, I have specific insight into matters like this and can assess your situation accordingly. Every case is different. If you’re looking for advice on how quickly you should be paying down your mortgage, feel free to contact me anytime.
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