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Pay Off Your Mortgage Faster

Gain speed toward being 'mortgage free' sooner.

Does your mortgage have flexible pre-payment options? With a few tips, you'd be surprised at how much (mortgage) money and time you could save.

The wind in your hair? It's your mortgage being paid down faster (saving you a lot more).

Every payment you make is designed to reduce your mortgage over time, shortening your amortization until it's paid off one day (25 years is the standard amortization).

But there are options to increase your paydown speed to reach the end faster. And we can help.

You likely have some pre-payment privileges on your closed mortgage term, regardless of whether you have a variable or fixed rate product.

That's good news — it will allow you to increase your payments or plunk more down on your mortgage principal to get ahead of interest costs.

Use pre-payment options to help speed your principal paydown.

At True North, we're always talking about a 'better' mortgage. That's because, along with getting your best rate, we believe that flexible pre-payment privileges are important to allow you the option to save even more.

Here's advice we give our clients on how to get ahead of interest costs:

  • Increase your regular payment amount
  • Double up a payment, or add more to a payment when you can
  • Put a lump sum down every year
  • Change your payment frequency

If you have access to a bit of budget room or extra funds, taking advantage of any of these options (or all of them) can make a real savings difference.

If you put extra down, how much more can you save?

For example, some mortgage products may allow as much as 20% to be put down against your principal each year. That means you can increase your regular payment by up to 20% or apply annual lump sum payments of up to 20% of your original mortgage amount (or a combination of both by up to 20%).

These amounts go directly to your principal, shortening your amortization (length of mortgage) and potentially saving you a pile of cash over the life of your loan.

Here's an example of increasing your payments by 20%

Let's take the 20% pre-payment privilege example and apply it to a $450K mortgage loan:

  • A $450K closed mortgage amortized over 25 years at a 5-year fixed rate of 4.50%
  • Lender allows for a 20% increase in your regular payments
  • With your regular payments of $2,490/month with no monthly increase, your remaining amortization after 5 years would be the usual 20 years
  • Now increase your regular payments by 20% to $2,988/month
  • Your remaining amortization after 5 years would be 13 years and 5 months, knocking off over 6 years of having to pay your mortgage!

If 20% is too much to squeeze out of your budget — a smaller increase or adding a bit more to a monthly payment here and there can still shorten your amortization over time to save more.

Here's an example of using the 20% lump sum payments every year of your term

Using the 20% example above, on a $450K mortgage at a fixed rate of 4.50% with a 5-year term, you would have the option to put up to $90,000/year in lump sum payments on your mortgage. If this was the only option you took advantage of, you could pay off your mortgage in less than 5 years!

Do what works for your budget — it can add up. Of course, we may all dream of being able to put a lot down on our mortgages — but it's not necessarily realistic. So, many lenders will allow you to apply lump sum payments in increments as low as $100 throughout the year, as long as you stay within that 20% (or whatever your lender allows). It all helps!

Can changing your payment frequency help you save?

Choosing an accelerated payment schedule can also reduce your mortgage principal and save you thousands.

Some lenders only allow a payment change once per year. Yet others, like our in-house lender, THINK Financial, allow payment changes more often if needed. No matter your lender, we can run the numbers for you to find the best option that fits your budget.

Don't have a flexible mortgage? It's harder to move forward.

Do you have a restricted mortgage or not enough options? We can help you uncover your mortgage fine print for what's available to you. If you need a different mortgage product that lets you stretch a little, we know what's out there and which lender or product may be a better solution.

Don't forget to talk to us when it's time to renew. We may be able to help you find a better mortgage fit (and a better rate) to save you a pile of cash.

Get a helpful renewal reminder

'Mortgage free' certainly has a nice ring to it.

A little here and there can go a long way, and you may find that your efforts help you travel faster down your mortgage-principal hill — to a 'mortgage-free' party sooner than you thought.

Talk to us! Our friendly, expert brokers can outline your options and provide the numbers for different payment scenarios to help you make clear decisions. We love to help you save and reach your financial goals!

Anywhere you are in Canada, we can help. Online, over the phone, at a store near you, or click our website chat.

Feel the need for paydown speed? We're here to help!