Mortgage Basics

How to Pay Off Your Mortgage Faster

How to Pay Off Your Mortgage Faster

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    A home is one of the most expensive purchases you will likely make in your life. It’s no wonder that you, like many other homeowners, may have set a goal to pay off your mortgage faster. You may be doing this by taking advantage of lump-sum mortgage payments. 

    However, by implementing other lesser-known strategies, you can significantly reduce the time it takes to pay off your mortgage.  By doing so, you’re freeing up your finances and saving on interest costs over the life of the loan. 

    Whether you’re a first-time homebuyer (FTHB) or a current homeowner who has been paying down your mortgage for years, this post will explore the various tips and techniques that will help you accelerate the repayment of your mortgage and achieve financial freedom sooner.


    Key Takeaways 

    • Paying off your mortgage allows you to free up your finances.
    • Increasing the frequency of your mortgage payments, such as switching to accelerated payments, can help you realize significant cost savings and become mortgage-free faster.
    • Making lump sum mortgage payments or increasing your payments by what you can comfortably afford can significantly reduce years of interest on your mortgage.

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    Why is it Beneficial to Pay Off Your Mortgage Faster?

    Paying off your mortgage faster offers several benefits. The most significant benefit is that it frees up your finances by eliminating what is likely your largest monthly expense. Without a mortgage payment, you will have more disposable income to focus on and allocate towards other financial goals, such as savings and investments. Paying off your mortgage also allows you to build more equity in your home much quicker. 

    As you pay down the principal balance, you are increasing the amount of ownership you have in your property. This provides you with more flexibility in the future to use the equity towards renovations, your children’s education, investments, or other goals.

    Paying off your mortgage early also saves you money on interest over the life of the loan. Mortgages accrue interest over the entire time it takes to pay off your mortgage. By paying off the principal balance sooner, you reduce your amortization and the total interest paid. This can amount to significant savings over the life of your mortgage.

    Payment Frequency Options Available to Borrowers

    When it comes to mortgage payments, most lenders typically provide borrowers with 6 frequency options. The most common option is monthly payments, with 12 payments per year. However, lenders also offer other payment frequencies that can help you pay off your mortgage faster.

    Monthly payments (12 payments per year):  Monthly payments are the standard payment frequency for most mortgages. With 12 payments per year, this option allows you to spread out your mortgage payments evenly over the course of a year. 

    While this is the most common choice, there may be more efficient options in terms of cost savings or paying off your mortgage faster.

    Semi-Monthly (24 payments per year): Semi-monthly payments involve making two payments each month, either on the 1st and 15th or the 15th and 28th of the month. Since there are 12 months in a year, this translates to 24 payments yearly. 

    If you have a $500,000 mortgage at 5.69% and a 25-year amortization, assuming your interest rate stayed the same for the entire 25 years, you could save approximately $1,090 in interest by choosing semi-monthly payments over monthly. However, you won’t realize any savings in your amortization (time) by choosing this option. 

    Bi-Weekly (26 payments per year): Bi-Weekly payments involve making payments every two weeks for 26 payments yearly. 

    You could save approximately $1,173 in interest over the life of your mortgage by choosing bi-weekly payments over monthly and $83 in savings compared to semi-monthly. As with semi-monthly payments, you won’t realize any savings in your amortization (time) with this option. 

    Accelerated Bi-Weekly (26 payments per year): Accelerated bi-weekly payments involve making payments every two weeks, resulting in 26 payments per year. The key difference between accelerated and standard bi-weekly payments is that you are making the equivalent of one extra monthly payment per year.

    Accelerated payment options will give you the most significant savings over the life of your mortgage and help you pay off your mortgage sooner. 

    You could save approximately $76,852 over the life of your mortgage by choosing accelerated bi-weekly over monthly payments. Additionally, you will pay off your mortgage 3 years and 9 months sooner with accelerated bi-weekly payments over monthly. 

    Weekly (52 payments per year): Weekly payments involve making a payment each week for 52 payments per year. You make smaller weekly payments that can help you chip away at your mortgage balance more quickly. 

    You could save approximately $1,684.86 over the life of your mortgage by choosing weekly payments over monthly, $512 in savings over bi-weekly, and $594 in savings over choosing semi-monthly. As with semi-monthly and bi-weekly payments, you won’t realize any savings in your amortization (time) with this option. 

    Accelerated Weekly (52 payments per year): Similar to accelerated bi-weekly payments, accelerated weekly payments involve making the equivalent of one extra monthly payment per year. Accelerated weekly payments will result in more significant savings and help you pay off your mortgage sooner than other payment options. 

    You could save approximately $77,743 over the life of your mortgage by choosing accelerated weekly over monthly payments. Additionally, you will pay off your mortgage 3 years and 10 months sooner by choosing accelerated weekly over monthly payments. 

    How to Pay Off Your Mortgage Faster

    Now that we’ve explored the different payment frequency options, let’s discuss the various strategies you can implement to pay off your mortgage faster.

    Speed Up Your Mortgage Payments

    By increasing the frequency of your mortgage payments, you will reduce the amount of interest that accrues over the life of your mortgage and the time it takes to pay it off. Opting for a semi-monthly, bi-weekly, or weekly payment schedule over monthly will help you realize some interest savings, though it won’t help you pay off your mortgage much sooner. 

    However, making the switch from monthly, semi-monthly, bi-weekly, or weekly to accelerated bi-weekly or accelerated weekly payments will significantly reduce the length of time it takes you to pay off your mortgage. You’ll also realize significant cost savings

    Make a Lump Sum Payment on Your Mortgage

    Another way you can pay off your mortgage faster is by making lump sum payments. This involves making a payment towards your principal balance, which can significantly reduce the length of time it takes you to pay off your mortgage and save you money on the interest-carrying costs. 

    If you receive an inheritance, annual bonus or tax refund, consider applying that to your mortgage to help pay it off faster. Before making a lump sum payment, it’s important to check with your lender to understand your prepayment limits and any penalties or restrictions that may apply if you go over the limit. Some lenders allow you to make spread-out lump sum payments up to a certain percentage of your original mortgage amount throughout the year without incurring penalties. 

    Increase Your Regular Payment Amount

    If making a lump sum payment is not feasible, you can still accelerate your mortgage payoff by increasing your regular payment amount. Even a small increase can make a difference over time. If you have additional cash flow, say from a recent promotion at work, you can choose to increase your mortgage payments. 

    By increasing your regular payment amount, more will be paid towards the principal balance with each payment, reducing the overall interest paid and shortening the time it takes to pay off your mortgage. It’s important to check with your lender to ensure any increase in payments keeps you within your prepayment privileges and if there are any additional restrictions. 

    Round Up Your Mortgage Payments

    Rounding up your mortgage payments is another simple yet effective strategy to pay off your mortgage faster. If your monthly payment is $1,257, consider rounding it to $1,300. 

    The additional amount you pay with each payment goes directly toward the principal balance, helping you pay off your mortgage sooner. While the impact of rounding up your payments may seem small, it can add up over time and make a difference in the long run.

    Paying Your Mortgage Off Faster at Renewal

    Renewal is the perfect time to re-evaluate your mortgage rate and terms and explore the strategies available to pay it off faster. Shopping around for the best rate and terms could help you save money and time on your mortgage. 

    Finding lower mortgage rates at renewal: When your mortgage term is up for renewal, it’s wise to shop around for better rates. By finding a lower mortgage rate, you can potentially save money on interest payments over the life of the loan. 

    If you can secure a rate lower than your current rate, you could reduce the amortization on your mortgage even more by continuing with the same payment amount you are currently making. 

    To find better rates, consider consulting with a licensed mortgage professional or exploring offers from different lenders. Take into account any fees or penalties associated with switching lenders, as this may impact your overall savings. Additionally, ensure that the new mortgage terms align with your financial goals.

    Use the option to shorten your amortization at renewal: Another strategy to pay off your mortgage faster at renewal is to consider shortening your amortization period. 

    By opting for a shorter amortization period, such as reducing it from 20 years to 15 years, you would increase your regular payment amount. Although your payments will be higher, you’ll pay off your mortgage faster and save on interest.

    It’s important to carefully assess your financial situation before choosing a shorter amortization period. Ensure that the increased payment amount aligns with your budget and that you have the means to make the higher payments without financial strain.

    Mortgage payment plans aren’t meant to be one-size-fits-all.

    Chat with a nesto mortgage expert & get a mortgage payment fit to you.

    Frequently Asked Questions

    How fast do most mortgage borrowers pay off their mortgage?

    The time it takes to pay off a mortgage can vary depending on various factors, such as the mortgage amount, interest rate, payment frequency, and any additional payments made towards the principal balance. 

    The most common amortization in Canada is 25 years, meaning that typically, most mortgage borrowers will take this long to pay off their mortgage.

    Is there a prepayment penalty for paying off your mortgage early?

    Some mortgage solutions may have prepayment penalties for paying off the mortgage early or making lump sum payments that exceed the allowed limit. It’s crucial to review your mortgage terms and conditions or consult with your lender to understand any potential penalties.

    Will paying off my mortgage early hurt my credit score?

    Paying off your mortgage early does not harm your credit score. On the contrary, it will show that you have good debt management ability for any potential creditors in the future. Consistently making timely mortgage payments will have a positive impact on your credit score. However, it’s important to maintain a healthy mix of credit account types and make timely payments on other debts to maintain a strong credit profile.

    Final Thoughts

    Becoming mortgage-free faster is an achievable goal with the right strategies and financial planning. By increasing your payment frequency, making lump sum payments, or increasing your regular payment amount, you can significantly save money (interest) and time (amortization) on your mortgage. 

    Additionally, exploring options at renewal, such as finding lower mortgage rates or shortening your amortization period, can further accelerate your mortgage payout. 

    Consult nesto’s knowledgeable and licensed mortgage experts to assess your financial situation before implementing any strategies.


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