Nobody wants to have their mortgage hanging around for longer than necessary! Although many people want to pay off a mortgage faster, they may struggle to work around the constraints of their existing agreement. In addition, some folks may feel that by signing up for a mortgage with a longer term, for example, they risk overcommitment.
Luckily, there are several different strategies that mortgage holders can employ to reduce their mortgage debt rapidly, no matter what type of mortgage they may have. I’m happy to discuss those below.
Depending on the type of mortgage you've taken out, it may be possible to make lump sum payments towards the balance. Note that the ease with which you can do this depends on whether you've got an open mortgage (where payments can be varied provided the overall monthly minimum is met) or a closed mortgage (where payments are limited to fixed installments).
If you suspect you may receive one or more lump-sum amounts over the term of your mortgage, it's worth considering a mortgage that allows for lump-sum contributions. For example, this would make sense if you expect gifts from family or regularly receive a performance bonus, overtime incentive, or otherwise.
Some mortgage agreements allow you to increase the amount that you pay each month. If you can manage to stick to a revised repayment schedule, you stand to save thousands of dollars in interest. Whilst many mortgage products will enable you to pay more each month, they may not offer the flexibility to drop your payment levels back down again.
Remember that if you're struggling to meet your mortgage repayments, I can offer a number of different options to make life easier and your finances more manageable.
It goes without saying that if you get any extra money in and the bills are all taken care of, you deserve to put it away for a rainy day, into savings, or to treat your household. That said, should a larger sum be made available like a large pay raise, an unexpected income stream or even the ever-mythical lottery win (don’t bet on this), putting it towards your mortgage can make it most cost-effective in the long run. Of course, this too depends on whether you’re permitted to increase your installments in the first place, as noted above. But even if you can’t do this, put the money aside in a TFSA or other similar account that you can draw from for monthly mortgage repayments without withdrawal penalties.
Many mortgage holders take out a 25-year mortgage. If you're looking for the quickest way to pay yours off, swapping the longer term for a shorter one, albeit with larger payments, has the potential for ample savings. An option with a shorter amortization period would be the best way to pay down a mortgage faster if you can afford it.
Depending on your personal financial profile, it may be possible to pay your mortgage off faster by opting for a product that's offered at a lower rate of interest than your current one. Remember that factors such as an improved credit rating, higher income, smaller borrowing requirement, or the ability to take on a product that's slightly higher in risk can make a difference. These may enable more options than what you had when first taking out a mortgage. You should also ensure it first makes financial sense to ‘break’ the mortgage (in other words, paying penalty fees).
I understand that taking out a fresh mortgage product can seem daunting; after all, if it's not broken then why fix it? The reality is that not only will I make the process of selecting a new mortgage hassle-free, straightforward, and rewarding, I will also find you a product that will make paying off your home loan less expensive. It’s a win-win.
On that note, if you’re ever in need of friendly, expert assistance with choosing a new mortgage, rescheduling an existing one or taking out your first, I’m happy to assist. Together, we can narrow down the options and find the right solution for your budget and preferences. Reach out today to chat with me about your home ownership plans.
Andrew Thake is a seasoned mortgage broker with over 15 years of industry experience. He’s assisted more than 2,200 clients in finding their ideal mortgage solutions. Recognized for his excellence, Andrew has received high honours and awards, including the National Rookie of the Year from TD Canada Trust and recognition as a Top 10 Ottawa Mortgage Broker in 2023. He has also been inducted into the Hall of Fame at Dominion Lending Centres and has consistently received their Platinum Award during his tenure as a mortgage broker.
Andrew’s dedication lies in serving his clients and prioritizing their needs with an empathetic approach. Throughout the application process, he provides tailored, informed, and efficient services to ensure the best mortgage solutions for his client’s unique circumstances. The best part of Andrew’s job is when he gets to see the joy on his clients’ faces following their mortgage approval.