Do you make lump sum payments towards your mortgage?
How many of you make additional lump sum payments towards your mortgage?
Originally, RD and I weren’t going to bother making lump sum payments, but since we had a decent amount of money in our joint account, we revisited that idea a few weeks ago. After some consideration, we decided that once a year (every January) we’d take a portion of our savings to make a lump sum payment towards the principal amount of our mortgage. This year (after accounting for a decent buffer and renovations we want to do in 2018), we decided to put down $3,500 towards our mortgage.
Except that we couldn’t. Or rather, TD Canada Trust is making it very difficult.
I went online and clicked on the “Make a Prepayment” button on the sidebar. There, I learned that if we put down $3,500 towards the principal balance of our mortgage, our amortization would be reduced by 13 weeks, and we’d save over $2,000 in interest. Amazing.
But when I went to finalize the payment, I got an error message: “No payment account exists. Please select a valid payment account.”
Must be a mistake! After all, they’re taking my mortgage payments out of my Tangerine account (not to mention my mutual fund contributions), so why wouldn’t they be able to take and additional lump sum payment? I called customer service who confirmed that unless I have a chequing or savings account with TD, I’m unable to make lump sum payments towards my mortgage online or over the phone. In fact, my only option is to go to a branch with either a bank draft or cash. WHAT.
Related: How we saved a 6-figure down payment
After I got off the phone, I did some additional researching online, I found out that most major banks in Canada do not allow lump sum payments unless the borrower also has a chequing or savings account with that bank. I mean I get why the banks don’t want to make it easy for you to make extra payments, but it just seems crazy that I can’t move money from an account that has already been verified and authorized to make my normal mortgage contributions. The technology exists.
Anyway, after I told RD what I had learned, part of me wants to just get a Tangerine bank draft ($10) every year out of principle, because it doesn’t seem right that we have to open up a new bank product that we don’t actually need.
Has anyone else come across issues like this before?
Do you make additional lump sum payments towards 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.