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Ways to Pay Off Your Mortgage Faster

Ways to Pay Off Your Mortgage Faster

Given that interest rates are at their highest in decades, the idea of paying off your mortgage faster may seem unrealistic. Unfortunately, many Canadians right now are struggling to manage higher borrowing costs on all of their debt, including their mortgage.

However, if you are fortunate enough to have some budget flexibility, there are steps you can take to fight back against high mortgage rates. In this article, I’ll show you how to pay off your mortgage faster.

How to Pay Off Your Mortgage Faster

Because most people are paying their mortgage over many years or decades, even the smallest payment adjustments can amount to thousands of dollars in savings over the life of your mortgage. If you want to make a bigger dent in your mortgage, here are some options.

1. Increase Your Regular Mortgage Payment

Most mortgage lenders will let you increase your regular mortgage payment by a certain amount during your mortgage term. You may be able to increase your original principal and interest payment by up to 100%, though some lenders may only allow you to increase your payment by 15% or 20%. Even a small payment increase, such as $50 per month, can save thousands of dollars in interest and shave years off of your mortgage.

2. Increase Your Payment Frequency

If you are currently making monthly mortgage payments, consider increasing the payment frequency. Here’s an example of how it can help. Instead of paying monthly, make biweekly payments. This way, you’ll make one extra monthly payment each year, reducing the amount of interest you pay over the life of the mortgage. You can get the same result by paying weekly instead of monthly.

3. Make Lump Sum Payments Whenever Possible

It can be easier to make small payment adjustments as they don’t impact your budget as much. However, if you do receive a lump sum of money, you may want to consider applying it as a one-time lump sum payment against your mortgage principal. Depending on the amount, a single lump sum can result in significant savings in mortgage interest and help you pay off the balance more quickly.

Not everyone has a lump sum of cash sitting around, but here are some possible sources:

  • Excess savings
  • Work bonus
  • Severance pay
  • Income tax refund
  • Gift of money
  • Inheritance
  • Insurance settlement
  • Lottery winnings

4. Reduce Your Mortgage Amortization Period

Your mortgage amortization period refers to the number of years it will take to pay off your mortgage. Your contractual amortization period is what your mortgage lender uses to establish your regular payment amount. Most new mortgages in Canada have a standard amortization of 25 years. But you can choose a shorter amortization period, like 15 or 20 years. This will increase your monthly payments, but you will save thousands of dollars in interest over the life of your mortgage.

While this is a legitimate way to pay off your mortgage faster, I don’t recommend it for most people. The problem with choosing a shorter amortization is that you lock yourself into a higher mortgage payment.

What happens if you or your partner lose their job or you have another financial setback? The higher mortgage payment could suddenly become a huge burden.

Instead, I recommend choosing the longer amortization, say 25 years, and taking advantage of the lender’s prepayment privileges to pay the mortgage off faster.

For example, you could increase your regular payment by enough to pay off your 25-year mortgage in 15 years, but if you find yourself unable to maintain the higher payment amount, you have the option of lowering it back down.

5. Refinance Your Mortgage

This scenario will only help you pay down your mortgage faster if you currently pay a high interest rate and can refinance your mortgage at a much lower rate. Unfortunately, this is not the reality in our current rate environment. Most Canadians are facing the opposite situation. They have a low mortgage interest rate and will likely be forced to renew their mortgage at a much higher rate when their term expires within the next couple of years.

But if you ever find yourself in the former situation, you can pay your mortgage off faster by refinancing at a lower rate. Just make sure you’re not facing a steep penalty to do so, as it may not be worth it.

Remember, before you make any changes to your mortgage payment schedule or amounts, consult with your mortgage lender and consider your personal financial situation. Your dedication to paying off your mortgage faster will bring you one step closer to financial freedom and long-term peace of mind.

Should You Pay off Your Mortgage or Invest?

You may wonder whether it’s better to use your extra funds to accelerate your mortgage paydown or invest. This is a much-debated topic, and the right answer really depends on your individual situation.

That said, here are some things you should consider.

For starters, think about the interest rate on your mortgage. If the rate is relatively low, it may be more advantageous to invest your extra money, as you could potentially earn a higher return on your investment than the interest you would save by paying off your mortgage sooner. However, if the interest rate on your mortgage is high, paying it off faster might make more financial sense, as it could save you more in interest charges over time.

Next, consider your financial goals. If becoming mortgage-free or reducing the mortgage term is important to you, using extra money to pay down your mortgage may align with these goals. Conversely, if retirement or your children’s education is a more pressing concern, you might choose to invest the extra money into savings or an investment plan tailored to those goals.

Are There Penalties for Paying Off My Mortgage More Quickly?

Prepayment privileges are the options that let you make extra payments on your mortgage without facing penalties. These privileges allow you to increase your regular payment amount, make lump-sum payments up to a certain amount, or even change your payment frequency, such as switching from monthly to semi-monthly payments. By taking advantage of these privileges, you can pay down your principal faster and save on interest.

However, your lender may apply prepayment charges (penalties) if you exceed your prepayment privileges. These charges may be triggered if you:

  • Break your mortgage early and renegotiate a mortgage with a lower interest rate.
  • Pay off your mortgage before the end of the term.
  • Make lump-sum payments that exceed your allowed prepayment privilege.
  • Refinance your mortgage with another lender.

To avoid prepayment charges, it’s wise to stay within the limits of your prepayment privileges. Always check with your lender about your payment options and any specific rules or fees for making extra payments.


How can I pay off a 30-year mortgage in just 10 years?

To pay off a 30-year mortgage in just 10 years, you’ll need to make higher monthly payments or extra payments when possible. Consider using lump sum payments from work bonuses, a tax refund, or an inheritance to decrease the principal amount.

Is it more advantageous to make extra monthly payments or a large single payment?

The best strategy depends on your financial circumstances. Extra monthly payments can help pay down the principal consistently, while a large single payment can make a significant impact in reducing the principal balance.

Are the benefits of paying off a 25-year mortgage amortization in 15 years similar to starting with a 15-year mortgage?

Yes, they can be similar. However, choosing a 15-year mortgage from the start typically involves higher monthly payments. On the other hand, paying off a 25-year mortgage in 15 years allows for more flexibility in budgeting, as you can adjust extra payments based on your financial situation.

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