How to Save Money on Your Mortgage in 2026
Saving money on your mortgage in 2026 feels much harder than it used to, and that’s exactly why your mortgage strategy matters more than ever. Affordability remains stretched for many borrowers, as home prices remain elevated and mortgage rates are predicted to remain relatively unchanged throughout the year.
Rather than chasing the lowest advertised rate, smart borrowers focus on the complete picture. Shopping for the best rates is just as important as comparing mortgage features, such as prepayment privileges and penalties. Flexibility often matters far more than the rate alone. In some cases, the lowest rate may not deliver the lowest total cost, especially if your plans suddenly change before your mortgage term is up.
Key Takeaways
- The lowest mortgage rate does not always mean saving money in the long term.
- Accelerated payment schedules can reduce interest costs without impacting cash flow.
- Refinancing can unlock savings, but only when the full costs are carefully evaluated.
Shop Around for the Best Mortgage Rate and Features
Shopping around remains the single most reliable way to lower the total cost of your mortgage. Two mortgages with the same interest rate can have very different long-term costs. A strong mortgage comparison looks beyond the interest rate. Prepayment privileges determine how aggressively you can pay down principal. Penalty calculations affect how expensive it is to refinance or sell before the term ends. Other features, like portability and blend-and-extend options, add flexibility that helps a mortgage adapt with you over time.
Many borrowers, once they have a mortgage, default to their current lender at renewal because it feels easy or familiar. In practice, renewal offers are often less competitive and may include more restrictive features, and these costs can add up quickly, eroding any savings from a lower rate. In a market where career changes, relocation, growing a family, or refinancing are far more common than before, these features can matter as much as, or more than, the rate itself.
Consider a 3-Year Fixed Rate Instead of a 5-Year Term
Shorter fixed mortgage terms have become a practical option for borrowers navigating the uncertainty of variable rates. In some cases, 3-year fixed rates are priced comparable to 5-year fixed rates. It’s worth looking at the economy to determine how long rates may remain where they are and whether they may decrease or increase in the near future.
Choosing a shorter term allows borrowers to reassess their options sooner. If you want to sell, refinance, or restructure your mortgage within the next few years, a shorter term can significantly reduce the costs involved. For borrowers who do not expect to stay in the same place long term, a 3-year fixed rate may offer a more balanced approach. Shorter terms combine the stability of a fixed rate, which insulates against rate changes, with the flexibility to make changes at a lower penalty than with a longer term.
Make Prepayments Toward Your Principal
Prepayments are one of the most effective ways to reduce the total cost of a mortgage, yet they are often underused. Any extra payments are applied directly to the principal, lowering the balance and allowing savings to compound over time as less interest is charged. The earlier these payments are made in the mortgage term, the greater the long-term savings.
Most lenders allow up to 10%, 15%, or 20% of the original mortgage amount per year without penalty. Taking advantage of your prepayment privileges, even if you can only contribute a small amount of extra money each year, can significantly lower the interest-carrying costs when spread out over the life of the mortgage.
Prepayments can also reduce the amortization, allowing you to pay off your mortgage faster. Prepayments offer a simple way to save money and accelerate paying off your mortgage without committing to higher year-round payments.
Save More on Your Mortgage With Accelerated Payments
Making more than a monthly mortgage payment can also help you reduce the total cost of homeownership. Increasing your payment frequency by switching to an accelerated payment schedule can help borrowers reduce interest costs without significantly affecting their savings or cash flow.
Choosing an accelerated weekly or bi-weekly payment results in an extra monthly mortgage payment each year. Over the life of your mortgage, this can translate into tens of thousands of dollars in interest savings while also shortening the time it takes you to pay off your mortgage in full.
Consider Refinancing
If you currently have a mortgage, refinancing can be an effective way to save money, especially if rates have fallen significantly since you started your mortgage term. Start by considering any additional fees and costs associated with breaking your mortgage, and compare them with the savings a new mortgage could realistically deliver. Prepayment penalties, legal fees, and closing costs can add up quickly and must be weighed against any lower interest rate you may be offered.
Rather than focusing solely on today’s rates, borrowers should consider total savings over the remaining term and whether waiting until renewal may be more advantageous. In some cases, refinancing sooner can reduce long-term interest costs or improve cash flow. In others, the penalties outweigh the benefits.
Traditional Refinance
Traditional refinancing is the process of replacing your current mortgage with a new one, either to obtain a lower interest rate, adjust the amortization, or add or remove a co-signer. Refinancing to a lower interest rate can help you save on interest over the life of your mortgage. However, before refinancing solely for a lower rate, borrowers need to understand all applicable costs to determine if a refinance is worth the upfront costs of breaking the mortgage.
Cash-Out Refinance
Cash-out refinancing, also known as an equity take-out in Canada, is another option to leverage the equity that you’ve built in your home to save on the interest-carrying costs of unsecured debts. In this type of refinance, you would borrow more than you owe on your remaining mortgage and use the difference to pay off higher-interest debts, such as credit cards or unsecured loans. When used to pay off higher-interest debts, this can lower overall interest costs by consolidating them into a single loan at a lower mortgage rate.
Review Available Tax Credits and Incentives
The federal and provincial governments have various tax incentives available that can meaningfully reduce the cost of homeownership. However, some will be limited to first-time homebuyers or restricted to the province where you reside. By exploring what is available, you could save on some of the upfront costs of obtaining a mortgage or retrofitting your home to make it more energy efficient or accessible.
Current homeowners considering selling may be eligible for the principal residence exemption if the home sells for more than the original purchase price. This exemption allows homeowners to sell their primary residence without paying capital gains tax on any increase in value, preserving a significant amount of equity. This exemption does not apply to property not designated as a primary residence, such as rentals or secondary homes, where capital gains taxes apply to any profits.
Frequently Asked Questions (FAQ) About Saving Money on Your Mortgage
What are some ways I can reduce my mortgage interest rate?
One of the best ways to reduce your mortgage interest rate is to shop around and compare offers from multiple lenders. Beyond the rate itself, choosing a mortgage with the best features may help you reduce your total interest costs, especially if you plan to make use of options like prepayment privileges.
Are there any tax incentives associated with taking out a mortgage?
Various grants and tax incentives are available through the federal and provincial governments. Some of these incentives will be restricted to first-time homebuyers in your province. When it comes time to sell, if the home is your primary residence, you can also benefit from the principal residence exemption, saving the capital gains tax you usually pay. For investment properties, mortgage interest is generally tax-deductible against rental income.
Can I use a portion of the equity in my home to pay for other expenses or projects?
You can use a portion of the equity in your home to pay for other expenses or projects. This is done through an equity take-out refinance, which increases your mortgage amount by accessing the equity you have built in your home. Home equity can be used for renovations, major repairs, consolidating high-interest debts, or funding other large expenses.
Final Thoughts
Saving money on your mortgage is less about choosing the lowest rate every time and more about choosing the right overall mortgage strategy for your financial situation. Borrowers who take the time to compare lenders, understand penalties, and are proactive tend to consistently achieve better long-term outcomes than those who focus only on advertised rates.
The real risks aren’t missing the lowest rates; it’s being locked into a mortgage that limits flexibility when life, finances, or market conditions change. A well-structured mortgage strategy should support your goals today while leaving room to adapt tomorrow.
Whether you are buying, renewing, or looking to refinance, speak with a nesto mortgage expert who can help you build a mortgage strategy that saves money today and protects you over the long run.
Why Choose nesto
At nesto, our commission-free mortgage experts, certified in multiple provinces, provide exceptional advice and service that exceeds industry standards. Our mortgage experts are salaried employees who provide impartial guidance on mortgage options tailored to your needs and are evaluated based on client satisfaction and the quality of their advice. nesto aims to transform the mortgage industry by providing honest advice and competitive rates through a 100% digital, transparent, and seamless process.
nesto is on a mission to offer a positive, empowering and transparent property financing experience – simplified from start to finish.
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