Mortgage Prepayments

Prepaying now means mortgage-free sooner

For many Canadians, a mortgage is the biggest debt they’ll ever take on. What people may not realize is just how big a dent they can put in their mortgage by making prepayments.

A mortgage pre-payment is an investment. Making extra payments or larger payments early on can add up to significant interest savings and shorten the life of the mortgage, leaving more money available for RRSPs and other investments, as well as changing lifestyle needs.


During the past year, 13 per cent of mortgage holders made lump sum payments, and 16 per cent voluntarily increased their monthly payments beyond required amounts, according to a recent consumer survey by the Canadian Association of Accredited Mortgage Professionals.


Here are some strategies for making prepayments:
Add a bit to your monthly payment:
Most of us can find an extra $50 per month by cutting out a restaurant meal. Add that money to your mortgage and you’re saving a lot on interest down the road.
Make a yearly pre-payment:
Paying an extra one or two thousand on your mortgage once per year on the anniversary date of the mortgage could yield significant savings over the life of the loan. For many borrowers, the money for such a prepayment comes from a tax return.
Make a larger prepayment early in the mortgage:
Note that lump-sum mortgage prepayments have a much greater impact on the total amount of interest you’ll pay if they are made earlier.