Give Me Back My Five Bucks

How I plan on destroying my mortgage

Last week, my first $600 mortgage payment came out of my bank account. $217 went to interest, and $383 went to the principal. That got me thinking about the different mortgage payment schedules, and how that will affect me in the future. Because I’m a natural planner, and obsessed with numbers, I decided to break it down by using the VanCity Mortgage Payoff Calculator.

Take a look at the following 4 scenarios based on my mortgage:

I bought my one-bedroom townhouse in Vancouver for $259,000, and am carrying a mortgage amount of $238,288. I took a 5-year fixed rate at 3.74% over a 30 year amortization, and my minimum mortgage payments are approximately $1,098/month.

Scenario 1
Mortgage payment: $1,098 monthly
Amortization: 30 years
Interest paid: $157,102
Age when paid off: 59

Scenario 2
Mortgage payment: $549 accelerated bi-weekly
Amortization: 26 years
Interest paid: $133,379
Age when paid off: 55

Scenario 3
Mortgage payment: $600 accelerated bi-weekly (10% prepayment)
Amortization:  23.5 years
Interest paid: $113,469
Age when paid off: 52

Scenario 4
Mortgage payment: $660 accelerated bi-weekly (20% prepayment)
Amortization: 20.5 years
Interest paid: $96,994
Age when paid off: 49

Please note that none of the scenarios above don’t take into consideration any annual lump sum payments I might put towards the principal.

Right now I’m using Scenario 3, but in a few months will move to Scenario 4. Of course, an argument could be made that taking the extra money I’m putting towards my mortgage is better off invested for the potential of a higher return. But, there is a huge psychological advantage to paying off your mortgage as fast as possible, and by putting money towards my mortgage, that’s a guaranteed return of 3.74%. In fact, the only way I wouldn’t make prepayments towards my mortgage is if it affected the amount I was contributing to my RRSPs. But as it stands, I am still contributing the same amount as I had been before I got the mortgage, so I feel comfortable with my decision.

With the mortgage I have with VanCity, I am allowed to contribute a lump sum up to 20% each year on my anniversary date as well as prepay up to 20% on my mortgage payments. I’m not sure how much of a lump sum I will be able to contribute because I have other savings goals in mind. I will still contribute something on each anniversary date, but by prepaying to the maximum allowed on a bi-weekly basis (Scenario 4) will ensure that I am doing all that I can budget-wise to pay off my mortgage as fast as possible. AND it keeps me in line for my #1 goal of early retirement.

Who knows what will happen down the road, but at least I’m doing what I can right now to make sure I’m setting myself up for success in the future.

Of course, the scenario doesn’t take into account the fact that mortgage rates in Canada will eventually change. But it does stand to illustrate just how powerful prepayments can be to a mortgage amortization!

Are you currently prepaying, or do you plan on prepaying on your mortgage?

Author: Krystal Yee

I’m a personal finance blogger and marketing professional based in Vancouver. I’m a former Toronto Star (Moneyville) columnist, author of The Beginner’s Guide to Saving and Investing, and co-founder of the Canadian Personal Finance Conference. When I’m not working, you can usually find me running, climbing, playing field hockey, or plotting my next adventure.


  1. Potato says:

    "Last week, my first $600 mortgage payment came out of my bank account. $217 went to interest, and $383 went to the principal."

    It looks like you're straight-lining your grand totals. Your first mortgage payment has more interest and less principal (~$340 goes to interest for the first year). Your last payment will be almost entirely principal.
    My recent post Brandon Sanderson- The Way of Kings

  2. Christy says:

    We have increased our payments over the years. We bought the house in 2005 with a 25 year mortgage. We went with weekly payments which immediately cut it down to 21 years. Now 6 years later there is 12 years left – so we have cut 7 years off the mortgage already. I intend to have it paid off in 10 years at most.
    Our mortgage is through Scotiabank and I can make extra payments daily if I want (just through online banking) as long as the annual total doesn't exceed 20%. I love number (round ones especially) and I tend to pay the $5-20/week that it takes to round the mortgage down. I know it's not a lot, but will add up over time. I'd rather do that than commit to a higher payments (which we have upped in the past) in case of job loss etc.

    • gmbmfb says:

      Interesting, I might also look into doing weekly payments. For some reason, I never really thought about it!

      Awesome job cutting down your mortgage! Every dollar counts. As for the commitment to a higher payment, I can reduce my payments back down to $1,098/month without penalty should I choose to do so. I'm not sure if that's normal for banks to do that, but I'm happy that I have the option, should something happen in the future.

      • wmwo says:

        Switching your current accelerated biweekly payments to weekly payments won't make a substantial difference unless you're adding even more onto every payment. Switching from monthly to biweekly you end up making an extra month's worth of payments every year. By switching from biweekly to weekly you're making almost the exact same payments, only you'll make an extra weekly payment once every 5 or 6 years (depending on the leap years).
        My recent post Bright Sunshiny Day

        • gmbmfb says:

          You know, that's what I thought. When I ran the weekly mortgage payment numbers through the calculator last night, the numbers didn't really change. And I thought it had something to do with how I was inputting the numbers. But it makes sense that it wouldn't make much of a difference.

          • Christy says:

            Yeah the reason we went weekly is because my husband is a tradesman who gets paid weekly. Otherwise we would have likely gone bi-weekly.

    • Frank says:

      I am also with ScotiaBank in the Toronto area and I match my weekly payment and still can put up to 20% down in any given year. Best I am able to do will be a total of 17 years and no more mortgage payments.

  3. Money Beagle says:

    We finished off a student loan last year, and added the amount we had been paying to the mortgage. We also put 25% of any tax returns, blogging income, or any other 'outside' income or windfalls towards either the mortgage or remaining student debt.

    Assuming we don't move, my hope is to pay off our 30 year mortgage in 20 years, which would be just in time for when Little Boy Beagle would be ready to go to college.
    My recent post No Stone Unturned- Expanding Our Search For Milk

  4. Pamela says:

    Yes! We plan on having our house paid off when our oldest child starts her senior year in high school. We bought the house when I was pregnant with her. After that we plan on spending the money that used to go the mortgage payment for her college tuition. This way our budget doesn't change in the amount – the name of the line item just changes from "mortgage" to "tuition". I agree with you that it is a huge psychological advantage to have a home paid off. Just knowing that during my daughter's college years and subsequently her younger sister's college years (there will be only 1 year of overlap) we won't have a mortgage will be a huge comfort!!!

  5. We are w/ BMO and can put up to 20% more per year on each bi-weekly payment and we can put 20% lump sum one time per year.

    In 2010 we bumped up our payment 20% and put a measly 1.5% lump sum – but last year we did carry 2 houses for 3 months and we had all of those fun closing expenses to deal with. We also imported and paid in full our car from the US. So it was a heavy year (and about $4500 investment in the old house to make sure it sold in less than a month – which it did – and we got a 461% ROI compared to what the agent was happy listing it for prior to the renos).

    This year we again bumped up our payments another 20% – so we're paying ~41% more than we HAVE to. I have some lingering student loans at highest rates (prime +2.5%) which make more sense to pay off than our 3.64% mortgage. It likely makes more sense to get rid of that debt and use that student loan payment in the future to apply to our mortgage. Pay less interest, reduce one monthly payment – seems to make sense to me!

    Anyhow – seems you have things in hand. Drop us an email if you ever want to discuss payment strategies – we have plenty of spreadsheets! :)

    My recent post Save Gas – The Financial and Health Benefits of Walking or Biking to Work

  6. Sue says:

    We had a BMO mortgage with the 20/20 option. Paying off the mortgage before having kids was a huge focus for us. We mainly used the annual 20% lump sum option (only raising the bi-weekly payments 20% one year), to give us some security in case we had any big life surprises that would need money available. I am happy to report that we ended up paying off the mortgage completely in 5.5 years. The first few years are slow slogging, but after you hit the half-way point, the money starts really piling up.

    As you can imagine, during this time we had very little extra money for trips, dinners out, etc. We basically stuck close to home. So to help keep us motivated, everytime we hit a milestone (usually 10k), we would pick up a cheap bottle of sparkling wine and would make a nice at home dinner to celebrate. It made us feel rich. :-)

  7. Mike Holman says:

    I love the idea of paying down your mortgage sooner. I've been a homeowner for 11 years (two homes in that time) and will be done with the mortgage about a year from now.

    You just have to keep at it. It doesn't seem to make a huge difference when you are starting out, but 10 years from now you could be looking at paying it off and will be thanking your younger self.

    My recent post The Last Minute RESP

  8. ss4bc says:

    There's just something about a payoff age in the 50s that makes my heart sink. I know how long 30years is, but man, it is forever.
    My recent post Investment Property

    • gmbmfb says:

      I know, it's crazy. Part of me wishes I had bought sooner, so that I could be done sooner. But I know that I wasn't financially ready to do it until now. I'm aiming to pay it off before I'm 45, but I will need to focus on saving for my lump sum payments each year, since I'll already be maxing out my bi-weekly prepayments. :(

      • Money Rabbit says:

        That's so scary seeing the age! I mean, I look at mortgages and think, 30 years, no problem. But that will make me 53 … yuck!!!
        My recent post I ate my 5k for breakfast because I am awesome

        • gmbmfb says:

          I know, 30 years doesn't *seem* like a long time until you realize how old you're actually going to be in 30 years. I'm hoping to be mortgage-free by the time I'm 45. Not sure if that's realistic or not, but I'm going to try as hard as possible!

          • Money Rabbit says:

            You'll do it, there's no doubt in my mind. However, odds are you won't be in that condo until you're 45? Do you think you'd keep it and rent it out as part of a real estate portfolio?
            My recent post I ate my 5k for breakfast because I am awesome

            • gmbmfb says:

              The place I bought does not allow rentals – once ex-BF and I decided to split up, it was less about finding a place that was rentable, and more about finding a place that I could feel comfortable in. I won't be in this townhouse until I'm 45, but my long-term goal is to be mortgage-free by that age. So any place that I buy by myself, or a future partner, I'd like to have that those mortgages destroyed by at least age 50, aiming for 45.

  9. Looby says:

    First- I totally read "How I plan on destroying my marriage" which confused me a bit!
    We're absolutely planning to pre-pay our mortgage when we ever get round to buying, I got a pension statement for work which had my regular retirement date on it and although I've always planned for early retirement seeing that number on it made me realise how badly I want to retire early and that means getting the mortgage gone asap.
    I had no idea about these 20/20 mortgages (we haven't looked into details much) but it seems like a great way to get the mortgage down.

  10. Ban Clothing says:

    I went with an open mortgage. The interest is prime +1 which is high than going with a fixed rate however, it gives the flexibility of putting additional funds against the mortgage at any time. We still went with a 30yr mortgage just so our payments would be low if something ever happened. In case we want to go on a big trip or something we have the option of going with the minimum for that month. It has worked well for us as we anticipate paying our house off in 10 yrs. The nice thing about an open mortgage is we don't have to deal with any penalties associated with paying more on our mortgage.
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  11. J. Money says:

    I don't know which I'd choose myself, but I DO know that I'm SO VISITING YOU one day in Vancouver! Unlike the last time I was in the area and forgot to message you :( You better be at FinCon11 girl.

    (and also, DAMN that's a cheap interest rate!!)
    My recent post 13 Clever Ways to Save More Money!

  12. wmwo says:

    I have a 20/20 mortgage with accelerated biweekly payments as well right now. While I didn't make any prepayments last year (was up to my eyeballs in debt – oops), I plan on making a lump sum payment this year with the coins I've been accumulating in a jar. It's not much, but its a start.

    My mortgage provider finally launched a website, so its much easier to check the balance, modify payment schedule and make lump sum payments now. When I get working again I plan on paying down debt aggressively until my mortgage 2 year mark (should have at least 1 debt paid off by then), then I'm going to start adding lump sum payments to the mortgage every payday.
    My recent post Bright Sunshiny Day

  13. Corina says:

    I think one shouldn't focus so much on the age one will have at the time they'll finish their mortgage – Lord knows how many changes will take place until then : marriage plus kids, selling and buying something bigger etc – but first and foremost the interest rate will change in 5 years! I guess these calculations imply the fact that the rate will always be 3.7% ( or what you have) – so this begs the question what will happen if rates will be 6% in 5 years? there will still be 20ish years to go until you finish…So this being said, the main thing is paying down the principal – and don't even look at the rates or years – just come up with a plan in reverse – let's say : 1st year $20000 – 2nd year 22000 etc and then you can add to it the interest to get the actual figure you need per year. It will give you a better undersanding of what you are doing – it removes the rate (which might be changing) from the equation

  14. psychsarah says:

    We pay more than our required payment, accelerated bi-weekly. Corina is right, I can't really say how long til we're done for sure, but it will be around 17 years total versus the 25 we first signed up for, which I'm pretty pleased with. We haevn't done the lump sum payment thing yet-we always seem to have other goals, like RRSPs or saving up for the imminent mat leave. I figure that if we came into a lump of money that didn't have a predestined home, I would put it on the mortgage, but barring that, I am happy with the schedule we're currently on. Like others, barring complications, we'll be done paying it off by the time our kid (currently in utero) goes off to post secondary studies, and way before retirement, which is what I orignally planned when we bought the house 5 years ago.

  15. Elizabeth says:

    I always thought I'd get a 30 year fixed loan and prepay – and the math you present here completely explains why. However, in your case…does it really make sense? I don't know the market in Vancouver, but this seems like it would only make sense if a. you were planning to keep the property forever (live in it until the end or keep it as a rental property when you eventually upgrade) or b. you were certain that this was the highest rate of return you could be getting on your money – you know that your home is going to go up in value no matter what, so when you sell you won't be taking a loss on this precious equity you've been building.

    I think you're three years younger than I am, which would suggest that you probably don't plan to live in this house if/when you get married, have kids, etc. Maybe you do and I'm just projecting my own experiences – I stopped worrying about paying down my mortgage quickly when I realized that I would never stay in my first place "forever". I still want the best interest rate possible, which may mean a 30-year fixed loan after all, but I don't want my money tied up in my house building "equity" when I can be earning more elsewhere.

    Just my two cents…I'm glad you're settling into your new place!

    • gmbmfb says:

      If my #1 goal in life is to retire early, I want to make sure that I'm getting myself out of debt as fast as possible. Right now my investments are not returning 3.74%, so by prepaying my mortgage, I am guaranteeing myself that 3.74% return. And no, I don't plan on living here forever. But wherever I move next will mean I will have another mortgage to pay. So the more I prepay my mortgage now, the less interest I will have to pay, and the sooner I will be done with my debt and able to retire.

      Also, I don't think that it's guaranteed that your home will go up in value no matter what. The people who lived in the home before me (lived in it for 5 years) actually took a loss when they sold it to me.

      • tbonez says:

        Your investments aren't making 3.74%? Are you thinking long term? With this low of a rate it makes zero sense to pay down the morgage. Both stocks and bonds have been beating that rate over time. My guess is that you aren't maximizing on your retirement accounts so placing the money there is almost certainly going to beat the 3.74% rate over a period of 20 years. If the rate goes up to 5-6% then it would make more sense to start to pay down the mortgage aggressively, but it seems like you're doing the opposite of conventional wisdom.

        Also, paying down a morgage is the same as investing in a safe investment such as a bond or savings account. It might make sense if the rest of your portfolio is in aggressive investments, but it makes you really conservative if your retirement accounts are not entirely in equities.

      • Elizabeth says:

        Totally agree that you can't assume your home will go up in value, especially short-term…which is why I commented in the first place. Like I said, I was under the personal finance spell of getting a 30-year fixed mortgage and prepaying the heck out of it for three years, until I figured out that, for me, that was silly unless I was planning to stay in the house forever. Why pay off a mortgage somewhere I won't be living? I'm working toward very early retirement myself, but if I am buying property that I only expect to live in for 4-5 years, my focus will be on the purchase price, closing costs, fees, and short-term interest rate…who cares what happens over 15-20 years if I know I am moving in 4-5? I think that, given your age and your point in your career, you can take more risks with your money…especially if you want to retire early. (Not crazy risks, just the kind that hopefully bring returns most of the time.)

  16. chipsforsupper says:

    One thing I don't understand is all these long-term mortgages say "5 year rate of whatever.' So what happens after 5 years is up?
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  17. gmbmfb says:

    That's a good point. Interest rates are going to change in 5 years. But while the interest rates are low for the next 5 years, I should be paying as much as I can to take advantage of that. It will only help me in the future. Yes, my calculations *imply* a 3.74% rate for the life of the mortgage, but that was just to illustrate my point of how prepaying can really make a difference in the long run. Once my 5 years are up, I will hopefully be making more than I'm making now, and can still continue to be aggressive in paying down my debt by putting down more towards the principal.

    • Corina says:

      I know what you were saying, Krystal – what I meant is that the prepayment calculators offered by banks ( and pretty much all are the same) they don't give you a clear big picture ( ie the years left on the mortgage). And this is a big pet peeve of mine:-)
      1 they assume the rate stays the same
      2 sometimes they give you the amount of interest that you pay only for the term( 5 years) – i don't know if that's the total cost for the whole term in your case
      3 depending on when they recalculate the interest it makes a difference if you pay back more money in the beginning of the month or towards the end, etc etc
      so i think that people should focus on paying down their principal and nothing else –

  18. Etienne says:

    1- I would not be able to stand paying mortgage after 50 years old. So option 4 would be my only choice.
    2- You will never stay in a one bedroom townhouse until the end of the mortgage, once boyfriend and kids will come along, you will want to move. Then it's a roll of dice. Either you will make money to buy something larger, or the price will be lower than the principal left on your mortgage:-/ Let's just hope prices go up.

    chipsforsupper: here in Canada, you need to renew (i.e. renegociate) your mortgage after 5 years, at the day's rate, so if rates og up, it will be more expensive.

    • gmbmfb says:

      Yeah, I know I won't be in this place forever. My goal is to be mortgage-free by the time I'm 50, but aiming for 45. So I will try to do whatever it takes to hit that mark. It might be a stretch in the real estate market of Vancouver, but maybe once I meet someone and want to start a family, we might get out of the city to somewhere cheaper. Or maybe I will have saved a ton of money by then. Who knows what will happen in the future. All I can really do is focus on what's in front of me right now.

  19. lurker says:

    I'm with Potato – by my calculations, your numbers should be reversed. Out of your first $600 mortgage payment, 383 would go to interest and 217 would go to principle. Every month, you pay off a little more principle and a little less interest.

    • gmbmfb says:

      I checked my mortgage account twice, and it says $383 went to principal, and that reflects on my mortgage balance. So…. not really sure what to say about that.

      • Mike Holman says:

        The numbers are reversed – but I'm thinking that maybe that is because it's the first payment and the time period between the start of the mortgage and the first payment was less than two weeks?

        That might account for the discrepancy. It should be showing higher interest amounts on the next payment (if I'm right).
        My recent post The Last Minute RESP

  20. Byrocat says:

    Part of the fun of having a website that deals with your mortgage is if it has a calculator attached that allows you to play with the various additional payment scenarios and see what the impact on the mortgage is.

    The good news is when you're starting out and can pile money against the principal. This is what chops years off the amortization due to the compounding effect (less to charge interest on in each month's calculation.)

    The bad news is when you're down to small amounts of principal remaining, and the amounts result in a payment or two and not years.

    My scenario is that I'm now under $100,000, with acceleated bi-weekly, and I have something like 5 years of payments left. The fun part here is seeing the principal drop through the next $1,000 layer each month, sometimes twice in a month when I have 3 payments made.
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  21. Leslie says:

    We're paying off our mortgage insanely fast – the goal is to be 100% debt free INCLUDING the house by age 29. Right now we've got just over $100,000 left and will need to pile on an additional $4000/month besides the normal payment to make it. Amazingly we've made it every month so far. I regret getting a mortgage in the first place and it would kill me to have debt into my 50s… but I'm weird.

  22. Karl says:

    I think its great you look at a wide variety of payment possibilities and how they affect total interest paid. Are these all done assuming you can renew at 3.74%? Have you looked at scenarios where interest rates jump in 5 years (or 10 or 20) from now (seems they only have 1 place to go from historical lows we are now seeing) – and how would this affect your decision for pre-payment options?
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    • gmbmfb says:

      Yeah, because who knows what the mortgage rates are going to be in 5 years when I renew, I based the numbers on 3.74% for the life of the mortgage. Clearly that is not realistic, but it was only supposed to serve as an example – to show the savings in interest by prepaying the mortgage. I would hope that in 5 years, I will be making more than I'm making now, so that if interest rates go up, I will be able to keep up at least with my 20% prepayment. But, like I said, who knows what will happen in the future. All I can base my decisions on right now is what is in front of me.

  23. jay says:

    I paid off my first/only mortgage just last month – it took 5 years and 2 weeks and I'm 33 now.

    It was just a small mortgage of about 140k. My lender let me double payments and do a 10% yearly prepayment. I did the double up (like you, I missed the first couple of months before I realized I could afford it) and then put whatever I could each year as a prepayment (a couple of years I had 10%, a couple of years I had 5%… one year I think I had very little).

    What kept me motivated was a chart that tracked each payment, the principal owing, paid and interest paid. My original plan was to pay it off in 10 years, but I got lucky and got some promotions. I still make less than you, though – even less than your fixed/job income.

    Something's off on your numbers though – your first payment of 600 would be 272 principal, 328 interest.

    Check out this mortgage calculator chart (it's almost as good as the one I used 5 years ago, which is no longer available… prepayments and charts – mmm.)

    • jay says:

      PS one of the things to remember is that sure, you could invest instead. However, that 3.74% you pay on your mortgage is after-tax savings. Whereas if you earn, say 5% on an investment, it'll be taxed (even if it's in an RRSP, it'll be taxed when you take it out and TFSA is too small to matter much).

      I realize I'm biased, having gone with the aggressive mortgage payoff. Now, I'm putting the mortgage money into a savings account and just looking at making an investment account.

      • jay says:

        (Sigh, I garbled it… I hope it's clear enough… the 3.74% that you save by paying off the mortgage is after-tax savings.)

  24. jay says:

    Accelerated weekly doesn't save too much more than accelerated bi-weekly… the savings are made by the 'extra' payments that you make per year. (ie. bi-weekly, you make 26 payments, whereas monthly you only make the equivalent of 24 payments of that size… weekly, you make 52 payments whereas monthly you would only make the equiv of 48 payments of that size)
    You may know that already, in which case I apologize for stating the obvious :)

    That extra payment per month will certainly do wonders though!

  25. I know interest rates are really low right now… but I would have locked into a 30 year fixed rate… sure it would be a bit higher, but in 5 years where will interest rates be??? If they go up can you make the payments?
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    • gmbmfb says:

      Yep, because I purchased well within my comfort zone, I will be able to afford the payments should interest rates go up. Also, in Canada typically the longest term in which you can have a fixed rate is usually 10 years, with 5 years being the most common.

  26. ND Chic says:

    I'm not making any extra mortgage payments because we want to have cash on hand to build. Our rate is low, 4.25%, and I figure that it will definitely be higher when we need to get another mortgage. I would pay extra but not throw all of your extra cash at the mortgage. I would do Scenario 4 and stick to it.
    My recent post Im Okay with Extreme Couponers

    • gmbmfb says:

      Agreed. I would never throw all of my extra cash at my mortgage. I don't believe in having all your eggs in one basket. I do hope to stick to Scenario 4, and prepay some sort of lump sum every year. But I also need to keep in mind my retirement goals, and I still want to travel multiple times a year.

  27. littlemermaid11 says:

    5-year fixed rate, so does that mean after 5 years, the interest rate will be adjusted? I worry about inflation, and if it happens, central bank may raise interest rate.

  28. littlemermaid11 says:

    Never mind, I just realized the comments above already answered my question, ha ha. I remember 1 rule in The Millionaire Next Door saying that never buy a house more than twice your salary. So take it in your consideration, with a possible maximum interest, what the final price for the house will be and how it compares to your salary.

    • gmbmfb says:

      If the rule was not to buy a house more than twice your salary, there would be no home owners in Vancouver.

      I don't believe in those sorts of numbers. It varies between each individual, what their lifestyle is, and what they truly feel comfortable with. My mortgage is around 3.5x my annual guaranteed salary (I also make freelance income which usually fluctuates between $500-800/month net). After my mortgage and all expenses are paid, I am able to save almost $2,000/month. For me, that makes me feel comfortable that I can take on whatever interest hikes might come my way in the future, with the amount of mortgage I owe.

      • littlemermaid11 says:

        I understand. It happens the same in California. And yes, it varies by individual. If you want to retire early, you may need to move to an area which has lower cost of living and lower house price. But the dilemma is it is harder to find a job. 2,000/mon in savings is pretty good on track. There is a calculator to find out how much you need to retire:… Good luck. And come by my blog sometimes ^.^

  29. B-Kat says:

    I am on a mission to rid myself of the mortgage by Feb '12. It has taken 8+ years and I have snowballed all my money into the prepayments and lump sums in the last couple of years. I have an emergency fund and RRSP's. Plus savings in place for the mortgage payout.__The 20+20 is a great option to cut years off and thousands of interest dollars away!

  30. Andrea says:

    I've been prepaying since August last year and intend to keep doing so until my mortgage is 100% paid off, way way before the 25 or 30 year amortization period is up (in the process of refi'ing not sure yet which I'm going with) I'm refi'ing a 5year fixed to another 5 year fixed at 2.5 years in. hope to have it paid off within 5 years to be completely debt-free by 30

  31. I actually started out with a 5-year fixed mortgage just like everyone else that buys their first home. I did my homework afterwards and realized that a variable rate mortgage is almost always better. I was able get a rate well below prime, as I researched other institutions and saw that they were offering a better rate than my bank (TD Canada Trust) and was able to haggle because of it.

    TD also offers double your regular payments and 10% prepayment of the original mortgage amount for the set term that you can pay at any time.

    I've been burning my mortgage very quickly and am very proud of it.

  32. Great stuff Krystal!

    My wife and I are currently putting down an extra 33% every 2 weeks. Feels great! Our mortgage is over $300,000 so anything we can do to pay it down faster with our 3.4% rate is necessary in our view. Rates will not stay like this forever :)

    Congrats on a great start, looking forward to seeing your progress with Scenario 4.

    BTW – here is a handy, gov't calculator for prepayments. I know, government and handy in the same sentence!

    Stay in touch!
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  33. Congrats! Paying off your mortgage early will be so satisfying. You mention that you can contribute a lump sum on the anniversary, does that mean there is a pre-payment penalty the rest of the time?

  34. Brian says:

    Hi Krystal,

    We also have a Vancity mortgage and I just wanted to clarify that the 20% yearly lump sum allowance can be paid at any time during the year
    Paying it earlier than your anniversary date will save even more interest. We are just over a year into our mortgage and have done this once and will do it again this year!

    • gmbmfb says:

      Hmm interesting. I will look into that once I get back into town. The advisor at VanCity indicated that it would be a once-a-year thing, but he could have been mistaken, or I could have misunderstood.

  35. Mike says:

    Loving the way you are thinking. When I bought my condo, I had the same realization! And wow– the interest you pay really adds up, doesn't it!?! When I bought my second condo, I changed strategies. This time I got a 15 year loan, and I made a goal to pay it off in less than five years, before my 30th birthday. I also bought a far less expensive property. So far, I'm coming up a little short, but exploring ways to save money, and having a lot of success! Good luck to you!

  36. I am impressed that you are taking such a proactive stance on your financial life. I have three teenage girls and I think that I may make reading your blog their homework!

    I would also like to just mention that there are other pre-payment options with some mortgage providers that allow you to pay off more quickly than the traditional 20/20. For example, with my own mortgage, I can double my payments AND put 20% down each year. My current rate is variable at prime -0.25. I had a really good mortgage agent who focused on the pre-payment terms, which then allows me to pay off my mortgage even faster.

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