Zoocasa
Sold Prices
Mortgage Calculator
Map
Market Insights
  • Blog Home
  • For Buyers
  • For Sellers
  • Real Estate News
  • Mortgage News in Canada
  • Free Guides (PDF)
  • Real Estate Infographics
Zoocasa
Home Mortgage News

Decrease Your Interest Payments and Pay Your Mortgage Faster

Zoocasa by Zoocasa
November 24, 2022
in Mortgage News
2 min read
Share
Tweet
Share
0 Shares

To combat rising interest rates, especially if you are locked into a variable mortgage, some lenders allow you to prepay a set amount annually to decrease your principal owing. This will lower the amount of total interest you’ll pay.

The exact amount depends on your financial institution and mortgage terms, however, keep in mind that if you decide to pay more than the maximum allowed amount you may be charged a prepayment penalty.

Turn Your Mortgage Cents into Interest Dollars

With the ongoing media talk about a potential recession in the new year, it’s difficult to envision a willful increase in mortgage payments. In past studies, they have found that less than 25% of Canadians took the action to make an extra payment toward their mortgage balance. 

  • Read: The Impact of Rising Interest Rates on Home Prices in Canada

However, it is important to keep in mind that every year inflation rises an average of 2%, with this year being an exception at 6.9% as of October 2022.

So why not consider adjusting your mortgage payments to get the most out of your dollars?

Let’s Talk Numbers

Let’s say that the average mortgage balance in the country is around $500,000, at about 4.84% with a 25-year amortization, making the average mortgage payment $2,863  per month. This means the average homeowner pays roughly $34,356 per year. Upping this by two percent equates to less than $700 that first year. Would you notice a roughly $57 increase per month?

  • Tool: Get the lowest interest rates by comparing lenders with our mortgage calculator

By increasing your payments by 2% annually, you can actually eliminate nearly 25% of the funds you would have paid in interest. 

Think you can handle even more? Try popping mortgage payments increased by different percentage points into an online mortgage calculator and check out the amortization table for yourself. 

If your annual household income is about $70,000 and rises 2% per year, that’s an extra $1,400 your first year and so on for you to budget into rising costs accordingly.

You may also want to implement this strategy in conjunction with a switch to bi-weekly accelerated mortgage payments. Using the example above, switching to bi-weekly would mean making 26 payments of roughly $1,431, for a total contribution of $37,206 to your mortgage per year. 

That’s already nearly $2,850 more per annum than a monthly payment would allow, and would slice years off your 25-year amortization. Couple that with a 2% increase to your mortgage payments per annum and you will have your mortgage paid down even quicker!

For more information and to get help with number crunching, contact your mortgage broker or lender. Where possible, and where you are comfortable doing so, manage your mortgage changes online.

This article was provided by CanEquity.com.

Published: May 13, 2011
Last Updated: November 24, 2022

Previous Post

The Top 8 Ski Destinations in Canada

Next Post

The Effect of Skipping a Mortgage Payment

Zoocasa

Zoocasa

Zoocasa.com is a full-service brokerage that offers advanced online search tools to empower Canadians with the data and expertise they need to make more successful real estate decisions. View real estate listings on zoocasa.com or download our free iOS app.

Related Posts

A person using a calculator.
Bank of Canada

BoC: Interest Rates Remain on Pause. What it Means for Prospective Buyers and Sellers

April 12, 2023
Market Insights

New Listings Up 88% Since December, Marking a Return to Pre-Pandemic Levels: TRREB

February 3, 2023
Bank of Canada

Bank of Canada Announces Fifth but Not Final Interest Rate Increase for 2022

September 7, 2022

Blog Search

No Result
View All Result

Newsletter Sign-up

Join a community of 130,000+ subscribers. Don't miss important real estate news, market data, and buying and selling tips.

Recent Articles

Georgian Bay island

Escape to Your Own Private Island: A Retreat in the Georgian Bay

June 8, 2023

The Most Viewed Homes in May 2023

June 8, 2023

Discovering the Best of Prince Edward Island: Top Towns, Restaurants, and Activities for Your Summer Road Trip

June 7, 2023
Someone typing on a calculator.

How Will the BoC’s Second Rate Hike of the Year Impact the Spring/Summer Real Estate Market?

June 7, 2023

Featured Listings (Updated Weekly)

A sleek, modern kitchen.

Most Expensive and Affordable Homes Sold in Ontario in May 2023

June 6, 2023
Birds eye view of Niagara Falls

Exploring Real Estate Opportunities: What $1M Can Buy Across the US and Canada

June 5, 2023
A small lighthouse in Nova Scotia

Luxury Real Estate in Halifax, NS: 7 Listings You Can’t Miss

May 12, 2023

Updated: 7 Houses Currently For Sale in Toronto Under $699,900

May 2, 2023
first-time home buyer programs and rebates

Social Media

250 The Esplanade Suite 408 Toronto, ON M5A 4J5

Terms of Use | Privacy Policy | Careers | Sitemap | About Us

 

Zoocasa © 2007–2022. The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA.

Stay Connected

1-844-683-4663 | [email protected] 

  • Blog Home
  • For Buyers
  • For Sellers
  • Real Estate News
  • Mortgage News in Canada
  • Free Guides (PDF)
  • Real Estate Infographics
  • Real Estate News
No Result
View All Result

Zoocasa © 2007–2022. The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA.