The Mortgage Journey, Part Seven: Paying Down Your Mortgage

By: Thomas Sigsworth on September 6, 2013

Welcome back to’s Mortgage Journey series. Each week on our blog, we’re examining an important step in the mortgage process, from figuring out if taking a mortgage is the right decision, all the way to making the final payment. In week six, we looked at the steps involved in finalizing your home purchase.


Week Seven: Paying Down Your Mortgage

The deal has closed and now you own your new home – congrats, it’s a great feeling! Want to know what an even greater feeling is? Owning your home without a mortgage, or ‘free and clear,’ as some people put it.

In most cases, the sooner you can pay off your mortgage, the better. Paying your mortgage off more quickly will reduce the amount of interest you end up paying to the bank and give you more money every month for the things you enjoy. Just imagine the freedom of no longer having to worry about your mortgage!

In fact, you might be surprised at how quickly you can pay off your mortgage just by using a few easy strategies.


Accelerate Those Payments

One of the easiest ways to pay down a mortgage faster is increasing the frequency of your payments.

More payments per month can cut down the amount of interest you’re charged over the long run and allow you to pay off your mortgage principal far more quickly. And of course, reducing the number of years that you take to pay off your mortgage can add up to huge savings.

Most banks in Canada allow you to choose between monthly, bi-weekly, accelerated bi-weekly and accelerated weekly payment schedules. Bi-weekly payments are popular with many Canadians because they allow mortgage payments to be coordinated with bi-weekly paychecks.

Most people are shocked by the amount of money they can save by making more frequent payments. It seems like magic, but the math if undeniable: accelerated bi-weekly payments, for example, can save you a huge sum of money over the life of your loan.

With a mortgage of $400,000 taken out at 5 percent interest, for example, a borrower would save $33,941.36 on a 25 year loan simply by making accelerated bi-weekly payments rather than monthly payments.  And just think, weekly payments will save you even more money!

Accelerating your payment schedule is a great way to shorten your mortgage journey and make it far less expensive in the long run. It’s a step that every Canadian borrower should at least consider.


Make Lump Sum Payments

Another great way to pay off your mortgage faster is by making lump sum payments. Most mortgage contracts in Canada allow you to make at least one lump sum payment toward your principal every year. A lump sum payment of, say, 10 percent of the principal can dramatically reduce the number of years it will take to pay off the loan. It will also reduce the amount of interest you pay to the bank by tens of thousands of dollars!

Many Canadians who find themselves with extra cash in the bank after a tax refund or annual bonus use the lump sum allowance to whittle down their mortgage principal and saves themselves interest. You can also make lump sum payments when your mortgage comes up for renewal.

Some lenders also provide other prepayment provisions in their mortgage agreements, such as allowing borrowers to “double-up” their payments each month up to a pre-determined maximum.

Make sure you’re aware of all the prepayment and lump sum payment options that are available to you, and take advantage of them as much as your finances will allow.


Watch Rates

You should always keep tabs on where interest rates are headed. A lower interest rate on your mortgage will allow you to pay it off years sooner. If you have an open mortgage, you may want to lock in at a certain point to take advantage of lower rates or avoid impending rate increases. Lower rates mean you’ll be able to pay off your principal sooner and save on interest.

Even if you have a closed term, it may, under certain conditions, be to your advantage to break your mortgage to reap savings from lower interest rates. It’s often a good idea to check in with your mortgage broker or financial advisor halfway through your term to get a sense of whether it makes sense to stay in your mortgage given the current interest rate environment.


Negotiate Your Renewal

A few weeks before your mortgage term ends, you’ll get a notice from your lender asking you to renew your loan. Don’t do it! Banks almost never offer you their best rate up front. You should shop around for the best mortgage product at renewal time just like you did when you first bought your home. Some banks may even offer incentives or ‘sweeteners’ if you switch your mortgage over to them. 

Ask your mortgage broker or use a comparison site like to make sure you’re getting the lowest rates available at the time of your renewal – it’s a must!



Paying down your mortgage is easy if you take the right steps along the way. Follow our advice and you’ll own your home ‘free and clear’ in no time!


Up Next Week:

The home stretch – using your home’s equity and making the final payment.