How to Pay Off Your Mortgage Faster in Ontario
A mortgage is often the biggest debt an Ontarian will ever have, and owning a home requires a major financial commitment. Although the average mortgage term lasts 25 to 30 years, you can achieve financial freedom and save thousands of dollars in interest by paying it off early. Here are some practical methods to help you pay off your mortgage faster in Ontario.
1. Make Extra Payments
Making extra payments is one of the most effective ways to shorten your mortgage term. Most lenders in Ontario allow you to make additional lump sum payments, or prepayments, toward your mortgage principal without penalties. Review your mortgage agreement to determine how much extra you can afford to pay annually.
2. Increase Your Payment Frequency
Switching to bi-weekly or accelerated bi-weekly payments instead of monthly payments can significantly reduce your mortgage term. By making a half-payment every two weeks, you essentially make one additional full payment each year, which helps you pay off your mortgage faster and save on interest.
3. Increase Your Regular Payment Amount
Many lenders let borrowers increase their regular mortgage payments annually. Even a small increase—such as an extra $50 or $100 per payment—can accelerate your principal reduction and shorten your repayment period.
4. Apply Windfalls to Your Mortgage
Use unexpected financial windfalls, such as tax refunds, bonuses, or inheritance money, to pay down your mortgage principal. Instead of spending this extra cash, applying it to your mortgage can reduce your repayment period and lower your interest costs.
5. Choose a Shorter Amortization Period
When getting a mortgage, consider selecting a shorter amortization period—such as 15 or 20 years instead of the standard 25 years. Although your monthly payments will be higher, you will pay significantly less interest over the life of the loan.
6. Refinance at a Lower Interest Rate
If mortgage rates have dropped since you first secured your loan, consider refinancing at a lower rate. A lower interest rate allows more of your payment to go toward the principal, helping you pay off your mortgage sooner. However, be sure to check for any penalties or fees associated with refinancing.
7. Avoid Unnecessary Debt
Reducing your overall debt load makes it easier to focus on paying off your mortgage. Avoid taking on unnecessary loans or credit card debt that could slow your progress toward financial freedom.
8. Use Mortgage Prepayment Privileges
Many lenders in Ontario offer prepayment privileges that let you make additional mortgage payments without penalties. These options may include lump sum payments or doubling up on regular payments. Understanding your lender’s terms can help you maximize these opportunities and pay off your mortgage faster.
Conclusion
Paying off your mortgage early requires discipline, but the financial benefits are well worth the effort. By increasing your payment frequency, making extra payments, and refinancing when possible, you can reduce interest costs and achieve financial freedom sooner. Before making any changes, consult your lender to ensure you maximize your savings while staying within the terms of your agreement.
