Mortgage Blog

Paying off a mortgage faster in Canada can save you a significant amount of money in interest over the life of the loan. Here are several strategies you can use to pay off your mortgage more quickly: 

Make Extra Payments: - 

Bi-weekly payments: Instead of making monthly payments, switch to bi-weekly payments. This means you’ll make 26 half-payments over the year (equivalent to 13 full payments), rather than 12. 

Make lump sum payments: If you get a bonus or tax return, apply it toward your mortgage. Most Canadian mortgage contracts allow lump sum payments of up to 10–20% of the mortgage balance annually without penalty (check your mortgage terms). 

Make additional payments: Some mortgages allow you to make extra payments each year (often up to 10–15% of the original loan amount). Even small extra payments can add up over time. 

Increase Your Regular Payments: -  

Increase the amount of your monthly payment: If your budget allows, increase your monthly payments by even a small amount. This will significantly reduce the amount of interest you pay in the long run. 

Refinance to a Shorter Term: -  

If you're in a position to do so, refinancing your mortgage to a shorter term (such as 15 years instead of 25 years) can help you pay off the mortgage faster. However, keep in mind that your monthly payments will increase. 

Consider a Mortgage with a Prepayment Option: - 

Some mortgages have options that allow you to make prepayments without penalties. Take advantage of these options to pay down your principal more quickly. 

Make Payments Toward the Principal: - 

When making additional payments, ensure they are going toward the principal balance rather than the interest. 

Use Your RRSP for a Home Buyers’ Plan (HBP): - 

If you are a first-time homebuyer or haven’t owned a home in the last four years, you can withdraw up to $35,000 from your RRSP (Registered Retirement Savings Plan) under the Home Buyers' Plan (HBP) to put towards your home. Though this isn’t specifically a 'faster payment' strategy, it can help lower your mortgage balance if you're still eligible for the plan. 

Switch to a Lower Interest Rate: - 

If interest rates have dropped since you took out your mortgage, consider refinancing to a lower rate. This will reduce the total amount of interest you pay and may allow you to pay off the mortgage faster without increasing your payment significantly. 

Avoid Using Your Home Equity for Other Expenses: - 

Try not to borrow from your home equity or take on other consumer debt while paying off your mortgage. Keeping the equity in your home allows you to pay down your mortgage faster. 

Allocate Windfalls or Bonuses: -  

Put any windfalls, such as tax returns, bonuses, or inheritances, directly toward your mortgage. This can be an easy way to make a lump-sum payment and lower your mortgage balance. 

Before making any changes to your mortgage payments, be sure to check with mortgage broker about the specific rules and fees associated with making additional payments. Some mortgages may have prepayment penalties if you exceed the allowed amount for lump-sum payments. 

You can contact us if you have any questions regarding mortgages