If you’re a Canadian homeowner looking to become mortgage-free sooner, you’re not alone. Paying off your mortgage faster can save you thousands in interest and give you greater financial freedom. Here are five proven strategies that can help accelerate your path to homeownership without compromising your financial stability.
1. Make Bi-Weekly Payments Instead of Monthly
One of the simplest yet most effective ways to pay down your mortgage faster is switching from monthly to bi-weekly payments. When you pay half your monthly amount every two weeks, you’ll make 26 payments per year instead of 12. This equals 13 full monthly payments annually, giving you one extra payment each year.
2. Increase Your Payment Frequency to Weekly
Taking it a step further, weekly payments can accelerate your mortgage payoff even more. With 52 payments per year, you’re making the equivalent of 13 monthly payments. Plus, payments are smaller and more manageable, making budgeting easier for many households.
Pro tip: Check with your lender first, as some may charge a fee for changing payment frequencies.
3. Take Advantage of Lump Sum Payments
Canadian mortgages allow you to make lump sum payments without penalty, typically up to 10-20% of your original mortgage amount annually. That means you can make a substantial payment that is completely applied to the principal of your mortgage and not the interest. Take advantage of this by using “free” or windfall money:
- Tax refunds
- Work bonuses
- Inheritance money
- Investment gains
4. Round Up Your Payments
A painless way to chip away at your mortgage is rounding up your payments. If your monthly payment is $2,187, round it up to $2,200 or even $2,300. These small additional amounts go directly toward the principal and may not be difficult for your monthly budget.
5. Shorten the Term
When you first get your mortgage, consider shortening the term if your budget will allow it. Or, when you renew, consider shortening the term then. Shaving 5 years off the term of your mortgage can substantially decrease the amount of interest you will pay by the end. However, be careful not to pull your monthly budget too tight. You will still need room in your budget to accommodate unexpected expenses and the rising cost of living.
The Bottom Line
Paying off your mortgage faster in Canada requires discipline and strategy. Start with one method and gradually incorporate others as your financial situation improves. Remember, every extra dollar toward your principal today means less interest paid tomorrow.
Consider speaking with a mortgage broker or financial advisor to determine which strategies align best with your financial goals and circumstances. Your future debt-free self will thank you for the effort you put in today.