paying off your mortgage

Dec 5, 2020 | Mortgages | 0 comments

How long will it take to pay off your mortgage?

Mortgages | 0 comments

So, you have purchased a home. As a new homeowner, one of the first questions we often ask is, “How long will it take me to pay off my mortgage?” 

There are 2 key terms to understand in order to make the most educated decisions about how fast you pay of your mortgage.

Amortization – 

The amortization period is the life of the mortgage, or the length of time it would take you to pay your mortgage in full if you never made an extra payment.  In Canada, with less than 20% down mortgages are amortized over 25 years, they have a 25-year mortgage life.  When clients have down payment over 20%, they can chose to amortize their mortgage, (or have a mortgage life), up to 30 years.

Mortgage Term – 

The mortgage term is the length of time that the particulars of your mortgage are active; the lender, the rate, the product.  In Canada, most clients choose a 5 year mortgage term, but there are lots of great options between a 6 month and 10 year term.  It’s important to discuss your future plans with your mortgage broker so that they can help you choose a term that matches those plans.

Understand your amortization schedule

If you are unsure how much time is remaining on your mortgage, you might want to check your original mortgage amortization schedule.  Your amortization schedule is the document that outlines the payments for the entire life of your mortgage. The amortization schedule indicates the monthly mortgage payment, how many payments you have left, and how much of each payment goes towards the interest vs principal.

This amortization schedule is normally listed within your mortgage documents, but it can also be provided by your mortgage lender or broker.  Make sure to ask for it at closing!

Your mortgage will be paid in full when your amortization periods ends. 

What if I want to pay off my mortgage faster?

If you want to pay off your mortgage faster and decrease your amortization you can do a few things:


  1. Make lump sum payments.  Any good mortgage should allow you to pay at least 15% of the original principal amount each year without penalty.  This means that if you originally borrowed $200,000 you should be able to pay an additional $30,000 without any pre-payment penalty.  That $30,000 balloon payment will go directly to reducing the principal owing.
  2. Increase your monthly payments.  Any good mortgage should allow you to increase your payment by at least 20%.  Doing this will drastically start to reduce the principal owing. 
  3. Round up.  A lot of clients just don’t feel they can afford to make major payments on their mortgages, but every little bit helps.  If your payment is $1850 per month, round up to $1900, in a few years you’ll realize you’ve taken months over your overall mortgage life!
  4. Increase your payment frequency.  If you’re paying your mortgage monthly, consider paying it weekly!  Think, 12 months * 4 weeks a month is 48 payments.  But…there are 52 weeks in a year!  This means, that you’re sneaking 4 extra payments on to your mortgage each year that could be applied directly to the principal balance. 
amortization mortgage schedule

If you do not have an amortization schedule, what can you do?

You should definitely reach out to your lender or broker if you’d like a copy of your amortization schedule.  They should be able to provide it for you without any fee. 

You can still calculate approximately how much time is left on your mortgage if you do not have your amortization schedule with you.

You can use any mortgage payment calculator that is provided online.  For example, Service Canada has a Mortgage Calculator that determines your mortgage payments and provides you with a mortgage payment schedule.  It also indicates how much interest you might be able to save and how many years you could shave off the amortization by making “lump sum” payments.

Can I change my amortization schedule?

If you have been making lump sum payments or paying extra each month, you may be able to change your amortization period. 

There are 2 ways to do this but it depends if your down payment was more than or less than 20%. 

With less than 20%, you could consider switching your mortgage to a new lender and pushing your amortization out to the original mortgage contract.  You would need to consider that if your mortgage is not up for renewal, you would incur a penalty to do this.

With more than 20% down payment, you could refinance your mortgage and push your mortgage life, or amortization period back out to 30 years.  In this case, if your mortgage was not up for renewal, you’d definitely need to consider the payout penalties to make this happen.  Lean on your mortgage broker to help you calculate these penalties. 

Bottom line 

The length of time it takes to pay off your mortgage is generally defined by the conditions of your mortgage.  You can always speak to your mortgage provider or look at your amortization schedule for more information.  You can make large or small changes to help decrease your amortization period and save on interest fees.  If you are thinking of refinancing to change your amortization period you will need to either time it correctly to reduce your pre-payment penalties or consult with your broker to make sure you understand the penalties at hand. 


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