Paying Off Your Mortgage Early

Paying Off Your Mortgage Early

Written by Caitlin Wood
Last Updated February 16, 2021

Mortgages are a great financial tool; they allow you to purchase a home without having to save up hundreds of thousands of dollars in cash. But of course, just like any type of loan, you’ll be charged interest which can make your 25-30 year mortgage seem even longer.

The first few years of your mortgage term can be quite depressing as most of the money you’re paying is going towards interest and not towards building equity. This will of course change as the years go on, but if you’re interested in building your equity faster, there are a few things you can do.

Mortgage Acronyms Decoded, click here.

Accelerated Payment Option

The average homeowner typically makes monthly mortgage payments, so 12 payments in a year. This means that if your mortgage payment is $1,000 you’re paying $12,000 towards your mortgage every year.

This is where the accelerated payment option can help you shave years off your mortgage term. The accelerated payment option allows you to make half payments (so in the case of our example, $500) every two weeks. One full year can be broken up into 26 two week periods; this means you’ll make 26 $500 mortgage payments in one year which equals $13,000.

There you go, you can accelerate your mortgage payments by $1000 every year and you’ll barely even notice it.

Read this article to learn more about the mortgage payment options available to you.

Consider Lump Sum Payments

A mortgage is a long-term commitment, typically 25-30 years. This means that smaller extra payments really do add up in the long run. This is great for you because it means you can add an extra $100 here and there over the course of 30 years or you can devote bonuses or income tax refunds to paying off your mortgage quicker.

Let’s say on average you’ll be able to find an “extra” $500 a year for the entire duration of your mortgage, that’s an extra $15,000 you can put towards your paying off your mortgage. By doing this you will reduce your amortization (click here to learn about amortization) period by years.

Live Below Your Means

If paying off your mortgage is a top priority for you then cutting back and living below your means is a great way to save up as much money as possible to go towards mortgage payments. Furthermore, if you’re lucky enough to get a raise or several during the duration of your mortgage, consider opting out of updating your lifestyle.

Speak With Your Mortgage Lender

Set up a meeting with your lender to speak with them about your options. There may be a payment option you had not considered or some type of restriction, it’s always in your best interest to speak with a professional.

Break it Down and Get Serious

Since paying off your mortgage faster is completely up to you and your financial decisions, it’s always a good idea to find motivation from somewhere. It could be from anywhere, but typically we find that seeing the numbers laid out in front of you is one of the best motivators. Here’s a breakdown of how quickly you’ll be able to pay off your mortgage when taking into account the above tips.

The example we’re going to use is a $350, 000 mortgage with a 30 year amortization period.

  1. First, you’ll switch to an accelerated payment plan, this means bi-weekly payments.
  2. Let’s say you’re able to find $5,000 in “extra” money every year (income tax refunds etc.)
  3. Another $1,000 a year from salary increases
  4. A $100 increase on each bi-weekly payment
  5. And finally any other cash you’re able to find throughout the year, let’s call it an even $1,000

In total that’s an extra $10,600 for extra payments every single year. If this isn’t enough motivation to get serious then we don’t know what is. While we do understand that the process of finding an extra $10,600 a year would be very hard, if paying off your mortgage as soon as possible is important to you, we know you’ll find a way to do it.

Seek Balance

If being as debt-free as possible is very important to you then, by all means, pay off your mortgage as quickly as possible. On the other hand, if you have a relativity low-interest rate then your hard-earned cash may be better suited elsewhere. You could always consider working on your home to increase its value or investing any “extra” cash you have.

Need More Information About Mortgages in Canada?

If you’re looking for a mortgage, let Loans Canada help connect you with a mortgage lender who can offer you the terms that best work for your situation.

Note: Loans Canada does not arrange, underwrite or broker mortgages. We are a simple referral service.


Rating of 5/5 based on 1 vote.

Caitlin is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security. One of the main ways she’s built good financial habits is by budgeting and tracking her spending through the YNAB budgeting app. She also automates her savings so she never forgets to put aside a portion of her income into her TFSA. She believes investing and passive income is key to earning financial freedom. She also uses her Aeroplan TD credit card to collect Aeroplan points so that she can save money when she travels.

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