Super-frugal mortgage payoff not realistic for most

One Toronto homeowner is getting a lot of attention after he paid off his $255,000 mortgage in just over three years. Sean Cooper was super frugal and an extreme saver, to put it lightly — and he worked three jobs.

He now lives debt free.

Canadians owe a collective $1.34 trillion on their homes. Cooper's is a great success story, but it's not one easily duplicated. Most of us can't go to such extremes to make our dreams of home ownership come true.

• Pay off your mortgage, live debt free: how one guy did it in 3 years
• Real estate woes: The secret lives of house-poor Canadians
• Moody's, The Economist warn of high Canadian debt, housing prices

While Cooper did it decades faster than most of us, that doesn't mean there aren't quick wins against your mortgage debt that are less extreme. It might not be paid off in three years, but it might be paid down three years earlier than you expected. 

Here are five ideas with potential to yield quick wins against mortgage payments.

Fight lifestyle inflation

For most people, as they make more money, they spend more money on lifestyle improvements in an effort to be happy and comfortable, whether it's on a new car, an expensive vacation, new electronics or fancy meals out.  

Lifestyle inflation can cause people to live paycheque to paycheque, make the minimum payments on credit cards and have less cash savings, even as they make more money.

Don't do that, says Bruce Sellery, a personal finance expert and the founder of Moolala, a personal finance training company. Instead, put it towards your mortgage and maintain financial discipline.

• Confessions of super savers: How they hoard their cash

"Every time you get a raise, call your lender and increase your mortgage payments. The number 1 takeaway," Sellery says of his financial advice, "is conscious spending. Mostly, we're not conscious. You've got your job and your kids and you're busy — it's not easy."

Rather than spending more as compensation increases, put that extra income towards debt, he suggests.

Match payment with payday

If you get paid biweekly, have your mortgage payment come out biweekly.

This option is almost painless, and can put a surprising amount of extra money in your pocket over time, Sellery says.

Let's assume a $250,000 mortgage at 3.49 per cent, amortized over 25 years. Monthly payments would be $1,247.

Divide that by two, and you get $623.50. Now arrange to pay this amount every two weeks, because a pay-every-two-weeks strategy results in 26 payments of a half-month's mortgage payment, you end up paying the equivalent of 13 monthly payments a year — an extra monthly payment every year.

This is what's known as an accelerated bi-weekly payment.

This strategy alone would save the borrower more than $16,300 in interest over the 25-year life of the mortgage. And that 25-year mortgage would also be paid off in a little more than 22 years.  

Start with transportation and food costs

Cooper knows that not everyone can work three jobs and live like a pauper.

He biked to work, brown-bagged his lunch and made dinners at home. "Kraft Dinner's probably been my best friend the last three years," he says.

While all of Canada's homeowners can't subsist on Kraft Dinner alone, transportation and food are areas where Canadians spend most of their money and two areas where it's relatively easy to trim back spending, Cooper says.

"If you can get a vehicle that's more fuel efficient, take transit or carpool. You can save money here or there and it can add up to a lot over the years," he says. 

In terms of food, Cooper recommends price matching and going through digital grocery store flyers that allow you to comparison shop.

"You can do it right on your smartphone pretty quickly and show the cashier at the store. That can add up to a lot of money," he says.

Cooper rated grocery store apps that can help consumers find deals at Canada's biggest grocery chains.

Shop around and do research

Talk to a mortgage broker, suggests personal finance expert Preet Banerjee.

Some people leave money on the table by not shopping around. A good mortgage broker can help you find the right combination of rate, pre-payment flexibility, and other variables of a mortgage that often go unlooked, he says.

"It's not always about the lowest rate if that low rate comes without the ability to make occasional lump sum payments, or the penalty for breaking early is onerous," he says.

Speaking of the occasional lump sum payment, Sellery adds that work bonuses and tax refunds are the perfect opportunity to put cash towards your mortgage.

Pay attention when your term is up for renewal, the experts say. Rather than blindly renewing at the offered terms in a renewal letter, take this opportunity to do some research. RateSpy.com and RateHub.ca are two sites that list rates available in the market. 

Don't treat home like an ATM

You'll never pay off your debt if you keep borrowing against your home's equity, says Banerjee.

"It's tempting when everyone on the street is renovating. It makes you feel like you should be renovating too," he says. It can make financial discipline difficult.

Home equity loans taken to make improvements to a house years before it's sold may do wonders for your remodelling dreams, but those renovations will likely be out of date by the time a potential buyer sees them. Or, the market could turn on you.

In those cases that money won't be coming back to your bank account.