Is it possible to pay off your mortgage quicker?

How can you pay off your mortgage faster? Most home owners would love to be able to rid themselves of their mortgages more quickly! There are some options for home owners who wish to take this path, but it’s important to ensure it is a viable option. Here’s some key information on mortgage rates, amortization schedules, and prepayment privileges. 

First of all, what is the Bank of Canada up to?

Your mortgage is closely tied to the actions of the Bank of Canada. When the central bank sets the overnight lending rate, this influences other institutions and causes them to adjust their mortgage rates accordingly. For example, mortgage rates increase when the Bank of Canada bumps up the overnight rate. When the bank lowers rates, mortgage rates will also sink. Right now, the overnight rate is holding steady at five per cent, where it has been since July of 2023. As inflation drops, and an economic downturn remains likely, this rate is not expected to increase. On the other hand, we may experience a decrease to the overnight rate as we move through the year. 

If you are trying to pay off your mortgage faster, you have a couple of options. Here are the choices you can consider, and how interest rates may affect you.

You can shorten your amortization period

Shortening your amortization schedule is fairly common. Your amortization schedule is the timeline for your mortgage payments. Longer amortization periods take longer to pay off, because this means the amount you owe will be paid out over a bigger timeline. Therefore, the opposite strategy will allow you to pay off your mortgage faster. A shorter amortization period means you will be making fewer payments within a smaller period of time, but those payments will be larger. 

The big thing to consider here is that you will be taking on larger payments on a more condensed schedule. Interest rates are high right now, which means many home owners are already dealing with inflated mortgage rates. It’s important to think about whether you can afford to take on this shortened timeline. 

You can benefit from prepayment options

Some home owners have access to prepayment privileges. This option lets you make extra payments on top of your regularly scheduled mortgage payments. These extra contributions help you chip away at the principal amount you owe, which will reduce your balance quicker. The sooner you pay off your mortgage, the sooner you are free from mortgage contributions and interest payments. However, make sure you have prepayment benefits in your mortgage contract before attempting to make additional payments! You can be charged a prepayment penalty if you don’t have this option. Your lender will also have a maximum prepayment amount you can contribute, so it’s important to stay within your contract’s guidelines.

Consult a broker first!

It can be very tempting to start taking action to pay off your mortgage sooner. After all, who doesn’t want to own their home free and clear more quickly? However, be sure to get in touch with a mortgage broker before making any moves. You will first need to determine whether you are eligible to take advantage of these options for paying off your mortgage. Even if you are, you will also want to make sure this is something you can truly afford. It is not worth putting extra financial strain on yourself to pay off your mortgage faster! We can help you determine what your best course of action is.

If you can pay off your mortgage quicker in a way that you can comfortably afford, we encourage you to consider your options! In order to learn more about your choices, don’t hesitate to reach out to us. We can help you evaluate your mortgage and how you can move forward.

If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can contact us at (902) 482-2770 or contact us here.