When my husband and I bought our house seven years ago, we made a mistake common to first-time home buyers: We spent every penny the bank offered us and bought the biggest house we could.
As a result, we were what you'd call "cash poor," with little money at the end of the month for all the repairs our fixer-upper desperately required. We did make one smart move, however, and it's something that most home owners neglect: We took advantage of flexible payment options on our mortgage.
We were fortunate to have a mortgage broker who took the time to explain to us how paying biweekly instead of monthly would put an extra payment toward our principal each year, which would knock 3.5 years off our amortization and save us nearly $28,000 in interest. We told him to sign us up.
He also showed us how increasing our biweekly payments by even a small amount could save us thousands of dollars over the life of our mortgage. So when the interest on our variable-rate mortgage dipped in our second year, we decided to stick with the higher payments and give an extra $50 to the bank every two weeks. We increased the payment another $50 when we renewed our mortgage two years ago.
As a result of those small changes, we're now on track to reduce our 25-year amortization to 18 years.
We've certainly made sacrifices to achieve that goal. For my husband, it meant learning to reshingle our roof, fix our leaky faucets and refinish our floors himself. For me it meant furnishing our home with hand-me-downs and yard sale finds. We even went a year without television.
A recent Research House survey shows more than two-thirds of Canadians rank being debt-free among our top financial priorities. However, a report this past spring by the Canadian Association of Accredited Mortgage Professionals shows 75 per cent of borrowers failed to make any type of extra payment on their mortgages in the 12 months leading up to the study.
Why is there such a contradiction between our financial goals and our actions? I posed this question recently as I was interviewing some of the cast and crew of Burn My Mortgage, a new reality show that exposes contestants' money mistakes and dangles a $5,000 carrot in front of them if they can get their acts together and pay down their mortgages. (Check out my article on the show here.)
The response to my question was unanimous: People don't realize how little changes can have a big impact.
Kit Redmond, the show's producer, told me about the sacrifices her family made to pay off their mortgage in seven years, including giving up their second car and taking simpler vacations.
Co-host Chad Bisch said working on the show had prompted him to double his own mortgage payments, and now he actually gets excited to see his mortgage statements. "It's a cool thing to own your house, to actually own it," he said.
I happen to agree, and can't wait until I'm that cool. The show has got me thinking about where my family might be able to find more money for our mortgage payments. I wonder how my husband would feel about a few more years without TV...
Burn My Mortgage premieres Tuesday at 8 p.m. (ET) on W Network. You can watch it online here. Then join me Wednesday at 11 a.m. (ET) for a discussion with Chad Bisch and co-host Kelley Keehn. And be sure to bring your mortgage-burning questions.