The Truth About Paying Off Your Mortgage Faster In Canada
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- Опубліковано 1 лип 2024
- Paying off your mortgage early seems difficult, but with a few small tweaks every year you can pay off your mortgage faster than you ever thought possible. By using prepayment privileges and a little bit of well thought out strategy you can pay off your mortgage in as little as 4.2 years. Now most people won't pay off their mortgage that early, however just a 2.5% lump some prepayment every year can reduce your mortgage from 25 years down to 15 and save you tens of thousands of dollars in interest.
In this video I show you how to make sure your bi-weekly and weekly payments are actually accelerated, I show you how increasing your payments by 10-15% per year can knock more than half of your amortization period out, and I show you how lump sum payments can really get your mortgage paid down quickly.
Last, but definitely not least, I tell you what mortgage you should use if you really want to aggressively pay down your mortgage while also protecting yourself from being house poor.
Also, here is the link to our big mortgage mistake we made when we got t0o aggressive paying down our mortgage. • Our BIG Mortgage Mistake
The presenter has taken great care in preparing
this video, however makes no representations or warranties with
respect to the accuracy or completeness of its content. The contents
of this video should not be considered a substitute for
professional financial advice. Please consult a financial professional
before implementing any of the strategies described in
this video. The presenter shall not be held liable
for any loss of profit or any other financial damages, including
but not limited to special, consequential, incidental, or other
damages. - Навчання та стиль
I paid my mortgage off in 8 years by maximizing my prepayment and getting a lower interest rate. I paid it off the year before Covid happened. No debt now and no worries about inflation or interest rates. Now topping up retirement savings is my new goal.
Paid off our 15-yr mortgage in 2-1/2 yrs by putting $1500/mo extra on the principal. Other lump sums as we could. Completely debt-free for the last 11 years. I sleep like a baby!
Great videos Nolan, appreciate the Canadian content.
Just wanted to also note that CIBC also has the re-advancing PLC product in the Home Power Plan (HPP) mortgage, which I have for my home.
Keep up the great work!
Congratulations on 20 k . Keep growing. Nolan you have great content and very simplified way of explaining very complex and complicated financial issues
Love these types of videos! We are FTHB and just got our mortgage in August of this year. We qualified on one income and the plan is for me to be full-time employed for 2-3 years before renewal. Our situation is a bit unique, we were renting our home and our landlord foreclosed, and we had the means and desire to stay! We had moved too much in the first few years of our kids' lives and don't want to do that anymore either! I love having our own place! It's so exciting!!! I love all of your videos!!!
This helps me greatly! Thank you for sharing this information.
You give me hope brother! thanks.
We currently pay our mortgage weekly, and this has accelerated our mortgage to the point that our payments are now paying more on the principal and less on interest.
Thanks for sharing the knowledge.
On track to paying off our mortgage in under 12 years. Great tips here 👏
Great content, thanks for sharing!
This is great information. Thank you.
Thank you for enlightenment.
Much appreciated!
Good stuff! 👍
Great video ❤
You should mention to people here that when you go from monthly to biweekly, you are essentially making 12 monthly payments, to 26 biweekly payments. Monthly divided by two payments equals 24 payments so you are essentially making an extra month payment per year.
Very good points I’m on this journey now, taking my 25 amortization down to 17, I would recommend it would be better to have a 3 month emergency fund on the side, then go all in on payments because it would really defeat the purpose of you had to dip back into it with the HELOC option but hey do what you want In the end !
Hey Nolan can you give us the formula you used to combine the lump sum and the increments and add the deduction to the compound interest.
I would love to play with variables
Good information, but if you have a low interest rate on mortgage it is better if you invest and can make more interest on your investment you can make more money than paying off the mortgage.
Thank you 😊 😊
I was told that it makes no since to pay off early with low rate like we have in 2021 and with inflation rate as we have in 2021.
Basically money that you pay off now worth a lot more to you then in 5 or 10 years.
This is correct. With rates well below inflation, you are better off investing the money. If rates start to increase, then it can be beneficial to start to pay down the mortgage faster.
I don't think this takes risk into the equation. If investing was a better idea than paying off your home, why not just refinance your home and put all the money into the market?
@@iamtheonlygod1or pay off other debts like car payments.
I did that in the 90's. We doubled our payments each month , that was an option then, paid off the mortgage in a very short amount of time. Of course house prices were a lot lower than too.
Thank YOU
Great video. Do you have any calculator or excel thing so I can see Mortgage calculations By different secarionries?
Great video. One question though: according to the payment graph for a mortgage in the first years of payment you pay more interest and less principal and all the ideas of paying faster at the start of the mortgage period, make sense, because you are getting to pay your interest faster that means you are going to pay less for the whole mortgage amount. My question is: after paying the interest chunk from your mortgage amount does it make sense to keep on accelerating your payments? (Unless you could take out the money from principal and use it in investments.) could you make a video with a real example and all calculations behind payment program with the different types of payments?
Im aiming for 10 percent of total principal every year. Going for that no mortgage life.
I recently came into an inheritance and have the ability to pay off my mortgage completely. I was recommended to get a variable rate in 2019 when interest rates were really low, but when interest rates started to rise I did not lock it in at a fixed rate and it is fortunate I didn't because I found out recently that the online mortgage company I have mt mortgage with does not allow you to pay it off early. Had I locked it in at a fixed rate, I would have had to wait another 5 years! I just now made the allowable maximum lump sum payment and I have to wait until March 2024 to pay off the rest. It is disappointing that I have to wait until March, though!
Really interested in that thermal lol
The people who disliked must be from the banking industry.
Thanks for the great advice on all your recent videos near December 2020. I learned a lot and plan to re-finance my mortgage and call that local broker. PS, what do you think about the Manulife ONE product?
We did accelerated weekly payments, increased it by 20% each year, made the 20% pre-pay each year and doubled up one payment annually. Mortgage was gone in 3y - 8m! This was with a Scotiabank STEP mortgage program but we had decent incomes to support the program easily. We also had a separate LOC from which we took the 20% pre-pay from, then spent the rest of the year paying that out & then repeat the next year. At the same time, the HELOC tied to the mortgage (STEP) was growing by the same decrease in principal - up to 65% of the home value. It was very similar to a Smith Manoeuvre mortgage conversion. What we didn't do, was invest the dead equity as it became available. That would have been a very different outcome. We have the opportunity to do this again with the purchase of an out of country vacation home using our paid up home as the funding source. Definitely doing an investing path as well. The income can be the paydown accelerator.
That’s awesome! Nice work!
Mike, wouldn't you have paid a higher interest on the LOC that you utilized to male 20% pre-pay? Help me understand how it's helpful to use the LOC to make the pre-pay?
@@fkap9371 The LOC was at 4.25% if I recall. Mortgage was $450k at 3.5%. LOC funds all went to the principal payment. By doing so, we avoided paying $100k in interest on the mortgage early on. Yes, you do need to repay the LOC over the following 12-months + your regular mortgage payments (total annual additional LOC interest came to $1,500). We paid $1,500 to avoid paying $100k later. But even if we did say, 5% in pre-payment, ($22k), that would have cut an additional $30k from the total payable. The interest you pay on a LOC is not as important as the interest you avoid paying on the mortgage. That's why pre-pays are a powerful tool. Banks realize most can't/won't do this, but their offer brings in business. The bank made maybe $30k from our mortgage - a yield of perhaps 1.75%. If we had stuck with the 300 monthly payments, the house would have cost us +$255,000 in interest payments.
Thank you so much for explaining this in the manner you did. I have been trying to understand how it would benefit me to do this. I have an appointment set up tomorrow with the bank
@@nathaliedrew3937 Good luck. Save what interest you can.
Good advice to have 👍🏼 tho if you have alot of other debt such as credit cards and credit lines or loans you would be better off paying something down in a much higher interest category, esp w/mortgage rates so icredibly low. 👌🏼
Agreed. One should pay off all non-mortgage debt before tackling the mortgage.
In this rate environment you are better off buying dividend yields stocks. Use the yield to prepayment the mortgage.
This all sounds good in theory but in the real world you also have to consider food, utilities kids schools and on and on. I live in BC and if you have kids in daycare food luck with extra or accelerated payments. I was paying 20k for daycare for a few years. Add in modest car payments on top. My tax return went to my yearly property tax. Best way to pay off a mortgage quick is to have no kids.
why would you pay the mortgage earlier given that the rate is < stock market return?
I just finished paying off my mortgage. I feel that there is so much people do not know what they have to do once this is done. from discharge statements to what you have to do with this. Notary, do you have to let your insurance company know, do you you have to let your city know? Is there higher taxes associated with all this?
Thanks for your channel, hope you are able to continue content.
it all depends on the size of your mortgage and how much you earn otherwise you will now pay for 40 years
I have a mortgage through a company that doesn't report to any credit bureaus... I called Equifax and the rep advised me to file a dispute in order to have it added to my credit file... Do you have any thoughts or advice about this situation? I'd like my mortgage listed on my credit file if possible or adviseable
My strategy: saved up cash, invested, grew it to twice the size of mortgage, then do a lumpsum to pay it off. Now my total annual expense is just $10K CAD. There's very little stress for me to earn enough to pay for living. I don't need to take risky investment and risking losing money.
Great strategy, but it's important to note that with this kind of strategy timing is everything.
If you can pay off your house mortgage in 4.2 years. Chances are you didn't even need the mortgage to begin with. In Vancouver, the most common way to purchase a home or condo is via a 40 year-amortization period. So, if you can really pay off your mortgage in 4.2 years, you should write a book about it.
40 year-amortization period ?
Legend has it - that drink, to this day, is still hot AF
🤣
Good points! Is it right time to refinance or wait until next year?
Really depends on your situation and your payout penalty.
Would you still recommend making extra lump sum (principal) payments when you have a fixed mortgage for 1.8%? I feel I have no incentive to make off my mortgage when I make 5-7% in the market (conservatively)
I put minimum down on my home when I could have put 20%, just so I could invest the money instead. The dividend off a Canadian market etf like xic alone covers more than the 1.45% mortgage rate I’m paying.
What is a tax refund?
This Smith Maneuver strategy is so cool and tempted to apply on my new rental property mortgage.
Let me give an example as below:
My property value - $800,000
Mortgage amount - $600,000
Now I have $40,000 in HELOC ($800,000*80% - $600,000).
Can i use this Heloc money for increase frequency of my Monthly mortgage to weekly mortgage with double payment and $20,000 annual prepayment without investing on any high interest investment?
Based upon above scenario, I will get some tax refund based on the Heloc interest and also # of mortgage years will come down faster.
Is it works with Smith Maneuver strategy and save money in the long run ?
Is it better to increase my payments or put that "extra" money and put it towards the lump sum pay-out?
The one thing to keep in mind about increasing your payments is that it is hard to undue it later. If you use the lump sum privilege you aren’t obligated to continue to do it in the future.
@@NolanMatthias I meant in terms of numbers....what would pay off the mortgage number? For example increasing my payments by $5000 over the whole year or paying it as a lump sum payment?
The sooner you apply the money the better, so a lump sum at the beginning of the year would be better.
We started at 25 years and have been in the house 3 years. We upped the payment 15 percent 2 of the 3 years and is got us down to about 17 years.
The goal is to pay it off by the time we need to send the first crotch goblin to university. The last year we've focused more on dividend investments with mortgage rates so low.
That’s awesome! Well done.
with the increase payments by 15% annually, does it have to be a 1 time 15% increase, or can you do 5% increases 3x in the year, or 3% increases 5x a year, basically not exceeding the 15%. Similarly, if you have let's say a lump-sum payment annually of 20%, does it have to be 1 lump sum payment in the year, or can you do as many as you want, not going over 20%
it depends on the lender. The better the lender the better the options, but you might be surprised which lenders have the worst options, Canada's biggest bank for example.
Wow. Who can we hire to help with these kinds of things? Mortgage broker? Who can help with implementing these strategies?
when you say putting your bonus in your prepay mortgage are you talking after tax or before tax ?
when you take out your bonus it's after taxes and on bonuses tax is high. I don't think that's a smart idea.
Is it better to put lumpsum payment at the start of the year vs the end?
Always better to put a lump sum payment early in on in the life of the loan
I just paid $8500 towards principal
It saved me $16,700 in interest over the life of the loan and reduced 3.5 years off the length of the loan
What mortgage companies do weekly payments?
Most of them
🙏👍❤️👏
I'm not sure I understand how paying weekly instead of bi-weekly is easier to manage. I would think most people receive their paycheck every 2 weeks, so to me it's much easier to manage how much on each pay check I need to budget for the mortgage. Am I missing something?
Nope. To each their own. Just preference.
Oh that hot bevvy looks tasty!