How Do Mortgage Payments Work In Canada?

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All banks actually give you some prepayment options available to actually help pay off your mortgage sooner, any prepayment options taken advantage of goes right towards your principal so accelerated payments just means paying a little bit extra compared to a normal payment which actually can make a huge impact on paying it sooner and reducing amortization which in turn also reduces your interest charge as well, generally at the interest cost so the difference between the accelerated and non-accelerated is non-accelerated is your normal payment accelerate payment just means a little bit more whatever you’ve actually budgeted to pay above and beyond your normal payment will be an accelerated payment.

One question I’ve always wanted to know is if you had the capability, let’s say you have five years left on your mortgage, if you had the capability to pay off your entire mortgage all at once right, is it better to continue paying it monthly or bi-weekly or is it better just pay it off all at the same time? , so that’s a great question as well Karl, it’s all based on personal preference whatever your personal preferences and whatever stage you’re in so if you feel like, hey you have some plans for those funds, you need those funds for a rainy day or you have some investment plans, it’s great to kind of hold on to that money. But if you feel like, hey you want to get your mortgage paid off sooner, it’s a great way but I would definitely have a conversation with your bank to see, hey do you have some prepayment options available to pay off the mortgage without facing any penalties. Most banks offer prepayment privileges so you want to make sure you have a conversation with them to see does your paying off your mortgage fit within those prepayment privileges so there’s no any penalties incurred to do so why would there be a penalty in paying my mortgage faster?

Well just depends Karl, there might be no penalties and there could be a penalty, it just depends on your prepayment options that you set with yourself at the bank at the time that you sign the contract with them, you are allowed to have a certain amount so it’s great to have a conversation with them to see, “am I paying off my mortgage within the limits of my prepayment options,” and if it is great there is no penalties, but if you’ve actually already used your prepayment options available, there might be a slight bit of penalty. Once again it’s a great conversation to sit down and have with your bank or lender to see if there are any So Mo, do you have anything else add in terms of mortgage payments? Absolutely, what I would really recommend to clients if you set yourself a budget and you have some free available funds available it’s definitely to add a little bit extra to your mortgage to kind of accelerate the payments, a little bit extra I can actually make a huge difference on your life of the loan, sometimes adding an extra 50 bucks, $50 bi-weekly or a $50 monthly could actually impact your mortgage being paid off a lot sooner.

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