For many Canadian homeowners, paying off a mortgage feels like the ultimate financial milestone. Becoming mortgage-free can reduce stress, free up cash flow, and give you more flexibility.
Paying off your mortgage early is possible, and even small changes can shave years (and thousands of dollars) off your amortization.
Here’s how to do it, plus the rules and opportunities unique to Canadian mortgages.
A typical Canadian mortgage lasts 25–30 years. Over that time, even a modest interest rate results in tens or even hundreds of thousands of dollars in interest costs.
Paying off your mortgage early can help you save on interest, increase financial stability, boost retirement planning and build equity faster.
Unlike in the U.S., most Canadian mortgages are closed-term, meaning you can’t just dump extra money into them anytime without penalties.
But you can take advantage of prepayment privileges:
Most lenders allow you to make a yearly lump-sum payment of 10–20% of your original mortgage amount without penalty. You will have to contact your lender to see if your mortgage allows this.
Example: On a $400,000 mortgage, you might be allowed up to $40,000 per year.
Many lenders let you increase your regular payments by 10–100%. Even raising payments by $100/month can cut years off your mortgage.
Switching from monthly to accelerated bi-weekly or accelerated weekly payments results in one extra whole month’s worth of payments each year. This automatically reduces your amortization. If you can afford it, accelerated payments often deliver the greatest impact with the least lifestyle disruption.
Let’s break all of that down even further. Here are practical, realistic strategies that work for Canadian households.
As I said above, this is the simplest, most painless method. Instead of 12 monthly payments, you make 26 half-payments per year. This adds up to one extra payment annually, but spread out, so it doesn’t feel like much.
Round up your mortgage payment. Pay $2,000 instead of $1,882. Pay $1,000 instead of $986.
This adds almost nothing to your monthly budget but chips away at the principal.
Figure out a way to make at least one extra payment every year. Use your tax refund, bonus, or annual raise to make a lump-sum payment. A single $5,000 payment each year can shorten a mortgage by years.
If you renew or refinance your mortgage, keep your payments the same. Even if your rate drops or you negotiate a better rate at renewal, don’t lower your payment. Keeping them the same means more money goes directly to the principal.
This is a fantastic way to help pay down your mortgage since nothing on your end needs to change!
Set aside a small amount monthly in a separate “mortgage attack” account. When you hit $1,000 or $2,000, make a lump-sum payment. This makes the process intentional and consistent.
New loans can eat into the money you could’ve put toward your mortgage. Think car payments, credit cards, or lines of credit. If paying off your home early is a priority, keep your other debts minimal.
Paying down your mortgage is powerful, but not always the most intelligent financial choice. You may reconsider if you have high-interest debt (credit cards or personal loans). You should pay those off first, as they cost far more than mortgage interest does.
If you don’t have an emergency fund, I would suggest not focusing on paying off your mortgage. You should ideally have a fund that would cover 3-6 months’ worth of expenses in case of emergencies. Once you have this set up and thriving, then you could consider the extra mortgage payments.
Finally, if your investments earn more than your mortgage rate. Depending on rates and working with a financial advisor, putting that extra money into investments may yield a higher return than paying off your mortgage.
Paying off your mortgage early in Canada is absolutely doable. You don’t need giant lump-sums or a considerable income to make it happen. Small, consistent steps have the most significant long-term impact.
If you’re looking for more information on mortgages, give me a call. I’d be happy to be a part of your financial journey. Give me a call at 250-826-3111, apply on my website or contact me through my online contact form to start the process today.
Let’s get your application off the ground.
