Buying a home is an exciting milestone for many Canadians. But along with the keys to your new property comes a mortgage that you’ll be paying off over decades.
While having a mortgage allows you to buy and live in your own home, it also means being saddled with debt for much of your adult life. Many homeowners want to pay off their mortgages as quickly as possible.
Fortunately, Canada’s major lenders offer various mortgage structures and payment options to help you pay off your home faster and potentially save thousands in interest costs over the life of your loan.
This guide will explain Canada’s most common mortgage payment options and provide tips on paying off your mortgage ahead of schedule. Read on to learn how to shave years off your amortization period and become mortgage-free even sooner.
What’s Included in Your Mortgage Payment?
Before diving into the various payment options, it’s helpful to understand what exactly your mortgage payment consists of. Your mortgage payment is made up of two main components:
Principal – This refers to the original loan amount you borrowed from the lender to purchase your home. When you make mortgage payments, a portion goes toward paying back this principal balance.
Interest – Interest is the cost you pay to borrow the money for your home. Your mortgage interest rate determines how much interest is charged monthly on the outstanding principal balance.
Your lender will calculate your monthly payment amount based on the mortgage details, including:
- Down payment amount
- Mortgage term
- Amortization period
- Interest rate
- Payment Frequency
- Whether property taxes are included
In the early years of your mortgage, a large portion of your payment goes toward interest costs. But as you pay the principal, more of your payment is applied directly to the principal balance.
This is why strategies that allow you to pay extra principal now can save thousands of dollars in interest charges later on.
Mortgage Payment Frequency in Canada
Most lenders give homeowners a choice of how often to make mortgage payments. The more frequent options allow your payments to align with your pay schedule and accelerate the paydown of your mortgage principal. In Canada, the most popular payment options are monthly, bi-weekly, and accelerated bi-weekly. [Source]
Monthly Payments
A monthly payment schedule is the standard option offered with most mortgages. You make your mortgage payment once per month on the same date, for a total of 12 payments per year.
Monthly payments are the easiest repayment structure to budget for, requiring less transaction management. However, this schedule will take the full amortization period to pay off your mortgage, resulting in higher total interest costs.
Semi-Monthly Payments
As the name suggests, these payments are made twice per month. To get the semi-monthly amount, you divide your monthly mortgage payment by two.
You will still make the equivalent of 12 monthly payments over the full year. However, some borrowers like aligning payments with bi-monthly pay periods.
Weekly Payments
You likely guessed it – weekly payments are made once per week, equating to 52 payments per year. Calculate this by multiplying your monthly payment amount by 12 months and dividing by 52.
Biweekly Payments
Biweekly payments are made every two weeks. To find the biweekly amount, take your monthly payment, multiply by 12 months and divide by 26.
The total amount paid is the same annually but split into 26 payments instead of 12, which can make budgeting easier for biweekly payers.
Accelerated Biweekly Payments
This schedule involves making 26 biweekly payments. However, instead of just dividing the monthly amount into 26 even payments, you calculate accelerated biweekly payments differently:
- Divide monthly payment by two
- Pay that amount biweekly
By paying 26 of these slightly higher biweekly amounts, you make the equivalent of one extra monthly mortgage payment per year, which can shave years off your amortization period.
Accelerated Weekly Payments
Similarly, accelerated weekly payments allow you to pay 52 weekly payments that add up to one extra monthly payment per year. To calculate, divide your monthly payment by four and pay that weekly.
As with accelerated biweekly, this structure helps you pay your mortgage much faster and save on interest. Speak with your lender to set up accelerated payments.
Payment Frequency Comparison
| Payment Schedule | Pros | Cons |
| Monthly 12 payments per year | – Easy budgeting with a single monthly payment – Simple to manage only 12 payments per year | – Longest amortization period – Higher total interest costs – Larger individual payment amounts |
| Semi-Monthly 24 payments per year | – Smaller payment amounts, more manageable budgeting | – Slightly more payments to manage vs monthly |
| Biweekly 26 payments per year | – Smaller payments spread over the year – Slight reduction to amortization timeline | – Some months have 3 payments – Difficult to budget for extra payments |
| Weekly 52 payments per year | – Provides easiest budgeting with weekly payments – Faster paydown than monthly | – More transactions to manage vs monthly – Slight amortization reduction only |
| Accelerated Biweekly 26 payments per year | – The payment amount is slightly more than a regular bi-weekly mortgage payment Dramatic reduction to interest costs and amortization timeline | – Budgeting for higher payment amounts – Remembering extra payments in months with 3 cycles |
| Accelerated Weekly 52 payments per year | – Smaller payments – Most reduction to amortization timeline – Saves most in total interest paid over the lifetime of the mortgage | – Most transactions to manage – Remembering to budget for extra payments |
Example: Weekly vs. Accelerated Weekly
Let’s assume a mortgage with the following details:
- Mortgage Amount: $300,000
- Interest Rate: 3%
- Amortization Period: 25 years
With these parameters, the monthly mortgage payment would be $1,264.
Regular Weekly Payments
To calculate the regular weekly payment amount:
- Monthly payment: $1,264
- Multiply by 12 months = $15,168 total annual payment
- Divide by 52 weeks = $292 weekly payment
Over the full 25 years, you would make 52 regular payments of $292 each year, totalling $15,168 per year.
Accelerated Weekly Payments
To calculate the accelerated weekly payment amount:
- Monthly payment: $1,264
- Divide by 4 = $316 accelerated weekly payment amount
By paying $316 each week over 52 weeks, you would pay $16,432 annually.
This is equivalent to an extra $1,264 monthly payment per year compared to the regular weekly payments.
Comparison Over 25 Years
- Regular weekly payments = $292 x 52 = $15,168 per year
- Accelerated weekly payments = $316 x 52 = $16,432 per year
- Regular weekly takes a full 25 years to pay off
- Accelerated weekly pays off mortgage 3 years faster
- Regular weekly total interest paid = $215,000
- Accelerated weekly total interest paid = $192,000
In this example, accelerated weekly payments allow you to pay off your mortgage three years sooner and save $23,000 in interest compared to regular weekly payments.
Pay Off Your Mortgage Faster
Beyond changing your payment frequency, many other strategies and mortgage features can help you pay your principal faster and slash interest costs.
Here are some of the top ways to pay off your Canadian mortgage ahead of schedule:
Find the Best Mortgage Interest Rate
A lower interest rate means more of your payment goes toward reducing your principal rather than paying interest. Even a slight reduction in your rate can make a big difference over the decades-long life of a mortgage.
Be sure to shop around with multiple lenders when you apply for a mortgage or renew an existing one. Consider both major banks and online-only mortgage companies to find the most competitive interest rates and mortgage terms.
Opting for a fixed rate also allows you to lock in a low rate for the long term, protecting you from future rate hikes.
Read more: Fixed vs. Variable Rate Mortgage
Take Advantage of Prepayment Privileges
Most lenders allow you to make additional lump sum payments or increase your regular payment amount by a certain percentage each year. This helps you pay down the principal faster without incurring penalties.
Be sure to understand the repayment terms of your mortgage contract so you know what options are available. Common privileges include:
- Making a lump sum payment up to a specified limit (e.g. 15% of the original principal)
- Increasing regular payment amounts by up to 15% annually
- Doubling up a payment once per year
- Making unlimited extra payments in the last year of your term
Speak with your lender to confirm your prepayment options before making additional contributions so you don’t risk penalties.
Shorten Your Amortization Period
Shortening your amortization from the full 25 or 30 years to a faster timeframe (e.g. 15 or 20 years) will increase your regular payments slightly. But in return, you’ll own your home free and clear much sooner and pay far less interest overall.
Ask your lender to calculate different amortization scenarios when applying for your mortgage. The savings could be significant if you can afford the higher monthly costs of a quicker amortization schedule.
Make Extra Payments Early in Your Term
Due to the way amortization works, your payments in the early years of your mortgage term go primarily toward interest. That’s why making lump sum payments or increasing your regular contributions in the first 5-10 years can accelerate the principal paydown.
For example, if your rate is 6%, it will take around 12 years to cut your remaining mortgage balance in half by making extra payments.
Make Lump Sum Payments
Setting up an automated annual lump sum payment is an easy way to make regular extra contributions.
Time this payment to align with when you receive additional funds like tax refunds, bonuses or an inheritance. Making this contribution a habit each year will seriously shorten your amortization schedule.
Switch to Accelerated Weekly or Biweekly Payments
As explained earlier, accelerated payment frequencies allow you to pay the equivalent of an extra monthly mortgage payment each year.
This can shave several years off your amortization with little extra effort simply by aligning your existing cash flow to this automated payment schedule.
Increase Your Regular Payment Amount
If accelerated payments don’t fit your budget, consider increasing your monthly mortgage payment permanently.
Even a modest increase of an extra $200 per month can shorten a 25-year mortgage term by several years and save thousands in interest costs over the long run.
Make a Lump Sum Payment at Renewal
When your mortgage term ends, you have the opportunity to make an unlimited lump sum payment without penalties. This can significantly reduce your principal.
Plan ahead by building up funds in savings or investments specifically to make a large prepayment at renewal time. Take advantage of this opportunity every time you renew your mortgage.
Keep Your Payment the Same When Changing Mortgage Terms
If you renew your mortgage at a lower interest rate, you usually can keep the same payment amount as before, even though a lower rate would allow a lower payment.
The extra amount gets applied directly to your principal by maintaining the same higher payment. You can potentially shave years off your amortization this way without actively changing your budget.
When Are Mortgage Payments Due?
Most lenders allow you to select the day of the month on which you want to make your regular mortgage payments. This date is set when you finalize your mortgage details and set up automatic bank withdrawals.
Some tips for selecting the ideal payment date include:
- Time payments with your paycheck – Having your mortgage payment withdrawn right after your paycheck is deposited makes it easier to manage cash flow.
- Avoid end-of-month due dates – If your payment is due at the end of the month, you risk occasionally having two mortgage payments in one calendar month, depending on weekends and holidays.
- Pick a consistent date – Sticking with a set date, like the 15th, avoids confusion compared to picking a variable date that changes monthly.
If needed, you can request that your lender change your payment date. Most will accommodate reasonable requests, especially if tied to a change in your pay schedule.
Should I Pay Off My Mortgage Early or Invest?
With some strategic planning and discipline, most homeowners can achieve a mortgage-free home years ahead of schedule. But you may wonder if investing your extra funds makes more financial sense than making lump sum payments.
As with most money decisions, there is no one-size-fits-all answer. Here are some guidelines on whether to pay off your mortgage faster or invest those funds:
- Compare rates of return – If your mortgage rate is higher than the expected investment returns, put extra money toward your mortgage. If you can realistically earn more investing, then invest.
- Risk tolerance – Paying off your mortgage faster provides a guaranteed “return” equal to the interest rate you avoid. Stocks and other investments come with more risk but potentially bigger rewards.
- Time horizon – The longer your timeframe, the more worthwhile investing becomes since you can ride out volatility. A short horizon favours debt reduction.
- Cash flow – If the extra funds available would eventually go to mortgage payments anyway, paying down the principal now assures that those funds will reduce your debts sooner.
- Peace of mind – For some, being mortgage-free provides significant emotional benefits and simplifies retirement planning.
As with any big financial decision, speaking with a mortgage professional or financial advisor can help weigh the pros and cons of your specific situation.
How to Choose the Right Mortgage Payment Options?
With so many mortgage repayment strategies and options for payment frequencies, how do you decide what works best for your situation?
Here are some tips for choosing paydown tactics that align with your goals and budget:
- Crunch the numbers – Use a mortgage calculator or amortization table to see the monetary impact (interest savings, years shaved off) for different options
- Understand your cash flow – Will extra payments now require cutting back elsewhere? Or can you redirect funds without impacting your lifestyle?
- Consider your timeline – If you want to pay off your mortgage before retirement, aggressive strategies make sense. A longer horizon provides flexibility.
- Review prepayment terms – Carefully confirm lump sum rules and fee implications before sending extra payments.
- Automate where possible – Set up automatic weekly or biweekly payments and annual lump sum transfers so extra payments happen effortlessly.
- Revisit at renewal – Reassess your financial situation and adjust payment schedules and amounts at each mortgage renewal.
Ready to Pay Off Your Mortgage Faster?
If being mortgage-free and owning your home outright sounds attractive, examine your budget and cash flow to see where you could direct extra payments.
Even minor changes like automating an additional biweekly payment or adding $50 to your monthly amount can make a surprising dent in your amortization timeline and total interest costs.
To explore your mortgage payment options and prepayment privileges, speak with one of our expert mortgage advisors at Best Mortgage Online. Based on your specific mortgage details, we can help you understand the impact of various accelerated payment schedules and lump sum amounts.
The sooner you start paying down your mortgage, the more interest you’ll save, and the quicker you’ll enjoy being mortgage-free!
FAQs
How can I pay off my mortgage faster in Canada?
Strategies to pay off the mortgage faster in Canada include making extra lump sum payments, shortening your amortization period, increasing payment frequency to weekly/biweekly, renewing at lower rates, and taking advantage of prepayment privileges.
Why should I choose accelerated mortgage payments?
Accelerated weekly or biweekly mortgage payments let you pay an extra payment yearly, reducing the amortization timeline, interest costs, and years until the mortgage payoff.
When should I make extra mortgage payments?
Making extra lump sum or increased payments early in your mortgage term saves more on interest. Paying extra principal down faster in the first 5-10 years provides the biggest payoff.
Do all Canadian lenders offer accelerated mortgage payments?
Most major lenders offer accelerated weekly or biweekly payments, but smaller credit unions or monoline lenders may not. Check with your lender regarding availability.
Can I make lump sum mortgage payments in Canada without a penalty?
Most lenders allow prescheduled annual lump sum payments of up to 15% of the original principal. Extra amounts may incur prepayment charges. Read your mortgage terms.
Is paying my mortgage faster or investing extra funds better?
It depends on your risk tolerance, time horizon, and mortgage interest rate compared to expected investment returns. Weigh paying down debt faster now versus disciplined investing for longer timeframes.
How do I calculate mortgage payment amounts?
Use an online mortgage calculator or amortization table. Input the mortgage amount, rate, term, payment frequency, etc., and the calculator will calculate the amounts.
Do credit unions offer accelerated mortgage payments?
Most large credit unions allow accelerated weekly or biweekly mortgage payments. Check with your specific credit union.
Can variable rate mortgages have accelerated payments?
Yes, most lenders allow accelerated payment frequencies for variable-rate mortgages. However, some lenders compound interest more frequently.
What’s included in my mortgage payment in Canada?
Your mortgage payment in Canada has two main components - principal (loan amount) and interest charged by the lender.