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The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company have become one company – The Canada Life Assurance Company. Discover the new Canada Life

The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company have become one company – The Canada Life Assurance Company. Discover the new Canada Life

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How to pay off your mortgage faster

Key takeaways

  • There are some strategies that can help you pay down your mortgage faster.
  • The downside of paying down your mortgage faster is making some financial sacrifices.
  • Some advisors suggest you try to save and invest, and pay down your mortgage rather than one or the other.

What’s the quickest way to pay off your mortgage?

There isn’t 1 “fastest way” to pay off your mortgage. However, there are several things you can do to pay down your mortgage as quickly as possible.

  • A shorter amortization – The amortization period is how long it will take you to pay off your mortgage. Selecting a shorter amortization (i.e., 25 instead of 30 years) will increase your regular payment amount but you’ll be mortgage-free sooner. Select the amortization that lines up with payments you’re comfortable with.
  • Make payments weekly or biweekly – Making more frequent payments can help shorten your mortgage and reduce the amount of interest you’ll pay.
  • Pay more than the minimum payment – Increasing your monthly mortgage payment can help you pay less interest and potentially own your home several years sooner.
  • Make lump-sum payments – Some mortgages have prepayment privileges which allow you to make additional lump-sum payments annually. Receive a bonus from work, a tax refund or other “found money”? Consider applying it to your mortgage to pay it down faster.
  • Find the lowest mortgage interest rate – A higher interest rate means you’ll likely end up paying more over the duration of your mortgage and it’ll likely take you longer to pay it down. Check with more than one mortgage provider to get the best rate on the mortgage that fits your situation.

Is a fixed-rate or variable-rate mortgage better for paying down faster?

Because it’s possible for the interest rate on a variable-rate mortgage to go down, and a lower interest rate means more of your payment goes toward paying off your principal, a variable-rate mortgage could help you pay your mortgage down faster. However, you must also be able to deal with financial uncertainly and the possibility that your mortgage rate could go up which means it could take you longer to pay down your mortgage. 

If you like knowing your mortgage payment will stay the same, regardless of mortgage rates rising or falling, then a fixed-rate mortgage may be your best choice. 

The challenge of paying off your mortgage

To pay off your mortgage faster, you’ll have to make some financial sacrifices. It might mean fewer vacations, restaurant meals or other perks that make life more enjoyable, but for many, the relief of not having a mortgage is worth the sacrifice.

Should you pay off your mortgage or save and invest?

Most advisors would suggest you try to do both. 

For instance, you can use a registered retirement savings plan (RRSP) to save for your retirement, then use the potential tax refund to help pay down your mortgage. 

You can also use a tax-free savings account (TFSA) to save for a lump-sum payment on your mortgage.

The above example is for illustrative purposes only. Situations will vary according to specific circumstances.

What's next?

Now that you understand more about paying off your mortgage faster, you may want to contact your advisor to:

  • Discuss what type of mortgage best meets your needs and provides you flexibility to pay it down faster.
  • Create an investment plan that helps you save for other goals and own your home sooner.

This information is general in nature and is intended for informational purposes only. For specific situations you should consult the appropriate legal, accounting or tax advisor.

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