Canadian Personal Finance Blog

Archive for June 6th, 2008

Now that we have figured out how to track our Mortgage using this Mortgage Work Sheet with Excel , we can now start doing some interesting tricks to see what we can do with our Mortgages.

The Power of Overpaying

I have some dear friends who paid off the houses they lived in, very quickly each time they moved from house to house (as their family grew). They both had good paying jobs, so they set up a simple goal with their Mortgage, each Mortgage payment they made, they were going to “double up” (i.e. pay a double payment to the bank). They had chosen the type of Mortgage (so there were no penalties to make extra payments) and sure enough they paid off their houses incredibly quickly.

How quickly could this be? If we go back to the model I have been using all week, this is how fast our family could pay off their house if they doubled up on their payments.

That’s amazing, you pay off the house in 8 years (give or take a month or two). Can most people do this? Not very likely, but it is something to think about and play with. Can you pay off your house early if you give up going out as much, and instead pay your Mortgage down? That is the question to ask.

More Mortgage Fun

With this worksheet you can explore the following interesting scenarios:

• Interest rate changes and what that might do to your pay back capabilities
• What happens if you take your tax refund and put it on your Mortgage, instead of into savings.
  • This is an interesting scenario, where you put money in your RRSP, you get money back from your taxes and then put that money on your Mortgage, a Win-Win proposal!
• And other interesting fun games.

Use this worksheet as a tool, and learn about what you can and cannot do when you buy your house.