5 ways to pay your mortgage off sooner

For many Canadians, deciding to purchase property entails a multidecade financial commitment. In fact, it’s often the largest one people will make in their lifetime. While spreading the cost of real estate over several years is an effective way to make the purchase more affordable, many Canadians still dream of paying off their mortgage ahead of schedule.

Why pay off your mortgage early?

Expediting payments can translate into more cash on hand in the future thanks to the savings incurred by avoiding interest on the loan. This can be particularly important for people planning lofty projects down the line, in real estate or otherwise, or those simply looking to retire early.

Here are five tips to pay off your mortgage sooner:

1. Increase your payment frequency

Making payments more often means paying down your principal faster. The result in the long run is that you’ll be saving money on interest charges. There are several ways to go about accelerating your payments. Rather than making monthly payments, some home owners opt for a biweekly or weekly schedule.

Your payment schedule is set when you sign your mortgage contract. Though some lenders do allow you to change it during the term, the schedule is typically an issue that needs to be addressed when you renew your mortgage.

No matter how you go about it, upping the frequency of your payments is a simple and easy way to speed up paying off your mortgage.

2. Make a lump sum payment

Do you have some extra cash on hand? Consider applying it to your mortgage! Many homeowners opt to do this on an annual basis with money left over from their recreational budget. Others chose to do so when they unexpectedly come into money, whether it be through inheritance, bonus earnings, or tax refunds.

Either way, a lump-sum payment applied directly to your outstanding principal balance can have a substantial impact on your overall costs.
Some mortgages allow you to make lump sum payments at any time, while others will require consultation to determine what’s possible. If penalties are involved it may not be worth it. It’s essential to consult your mortgage broker about this potentially easy way to pay down your loan faster.

3. Increase the amount of your regular payments

Depending on what your mortgage contract allows, upping the amount of your regular mortgage payments – even by a small amount – can result in substantial savings over the course of your loan. It can also mean paying your mortgage off a few years ahead of schedule.

Before planning to increase your payments, you need to speak to your broker to determine if there are any penalties involved that would offset the savings.

4. Maintain your payments at renewal

When your mortgage is up for renewal, a lower interest rate on the new contract can end up lowering your regular payments. However, if you opt to keep the amount the same, as if your interest rate hadn’t changed, you’ll be paying off your mortgage much faster.

5. Consult your trusted mortgage broker

Just as no two people are the same, neither are their mortgages. That’s why it’s imperative to consult your trusted mortgage broker before planning any changes to your mortgage. Your mortgage broker can work with you to determine the best strategy to pay down your loan faster based on your individual needs and objectives.