Make a lump-sum paymentMost closed mortgages (but not all) allow borrowers to pay off up to 10%, 15% or 20% of the original principal in each calendar year without penalty.
Thanks for nothing, you say. “I don’t have $50,000 to throw at my mortgage.” The good news is that you don’t need to pay down the entire 20 per cent. Throwing even a few hundred dollars at it here and there can make a big difference.
One popular suggestion is to put your tax refund to work this way. Assuming we have the $250,000 mortgage described in strategy one, and applying a $1,600 annual payment that the Canada Revenue Agency says is the size of the average refund, that manoeuvre alone would see that mortgage paid off three and a half years early and the mortgage holder would save $20,000 in interest.
Combining two or more of these strategies would result in even bigger savings.
Fortunately, it’s easy to virtually play around with various payment scenarios. Most financial institutions, banks, and mortgage brokers have online mortgage calculators that can spit out the savings for you.
Here’s a particularly useful one
And here’s a good one from the federal government’s Financial Consumer Agency of Canada.