After years of saving and planning, it’s all come together. You’re ready to buy a home!
Once you sign the papers and see loan amount, one of your next questions might be: How can I pay my mortgage off sooner?
First, let’s look at how mortgage payments work.
Each payment is made up of two parts: The principal (the borrowed money that you’re paying back) and the interest (the cost of borrowing money).
Over the life of your mortgage, you’ll pay thousands of dollars in interest. The exact amount varies based on your interest rate and your amortization period.
The amortization period is the time it will take to pay off your mortgage completely. A longer amortization period will lower your mortgage payments, but increase the amount of interest you pay over time.
As interest rates rise, you might feel especially motivated to pay off your mortgage! Paying down your debt sooner means you’ll save money on interest.
Here’s how to do it:
Did you know that the type of mortgage you choose affects how quickly you can pay it off?
With an open mortgage, there are no penalties for paying off your mortgage early. However, open mortgages have a higher interest rate—essentially, you’re paying for that flexibility.
A closed mortgage offers a lower interest rate, but you can only prepay a certain amount each year. Otherwise, you’ll face a penalty for paying off your mortgage early.
If you plan to make extra mortgage payments regularly, consider an open mortgage. But if not, stick to a closed mortgage for a lower interest rate.
Learn more about which mortgage is right for you.
Most Canadians pay their mortgages monthly. But you can take advantage of accelerated payment schedules to pay your mortgage faster.
By changing your payment schedule from monthly to weekly, your payments will be slightly higher—but because you’ll be mortgage-free faster, you’ll pay less interest.
Here’s how it works:
You take the amount that you pay each month and divide it by 4. Then, you make 1 payment each week.
This allows you to make roughly 1 extra payment per year, so you pay off your mortgage ahead of schedule.
At Cambrian, we offer weekly, bi-weekly, monthly, and bi-monthly payments! To change your payment schedule, contact us today.
Have you come into some extra money? Maybe you got a great tax return, a new job, or an inheritance.
One way to use your newfound funds is to pay down part of your mortgage. This is called a prepayment.
Prepayments go directly towards your principal, not the mortgage interest—and this helps you pay your mortgage faster.
However, the amount you can prepay varies based on the type of mortgage you have.
With an open mortgage, you can make additional payments at any time for no extra charge.
But even with a closed mortgage, you can still pay off part of your mortgage early. Every year, you can prepay 20% of your original mortgage balance without penalty.
You can make this payment in one lump sum or make several payments throughout the year.
To avoid prepayment penalties, be sure that you don’t exceed the 20% you’re allowed to prepay for the year!
Here’s a step-by-step guide on how to prepay your Cambrian mortgage.
There’s no doubt about it: paying down your debt is always a good idea!
But if you have different types of debt, it’s worth asking which one you should pay off first.
First, factor in the interest rate of your mortgage. Then, consider if you have other debts with a higher interest rate, such as credit card debt or a line of credit.
Depending on the interest rate and the amount you owe, it might make more sense to pay off those debts first. You can look at debt consolidation options to get out of debt sooner.
Alternatively, you could invest the money and try to earn a higher return on those investments than you’re paying in interest.
And if you don’t already have an emergency fund, you might consider putting the money towards one instead. This will prevent you from borrowing additional money if you face an unexpected expense.
As soon as you buy a home, you dream of the day that you’ll pay it off completely. Once you’re mortgage-free, you can enjoy one less bill payment each month (or week), not paying any interest on your mortgage, and financial freedom!
We’re here to help you make that dream a reality. Whether you’re buying your first home or about to renew your mortgage, book a meeting and we’ll help you get started on the path to being mortgage-free!
We would be happy to discuss your unique situation with you.
Our goal is to make complex topics like this one, simple.
It takes less than 5 minutes to make an appointment or to apply online. It is up to you how you want to meet your advisor - you will have the option to meet your advisor:
