Mortgage acceleration is an increasingly popular financial strategy used by homeowners in Canada to pay off their mortgage faster and save money on interest. It involves making additional payments to your mortgage each month, usually to the principal balance, which helps to reduce the loan amount faster and reduce the amount of interest paid overall.
While mortgage acceleration can be a great way to save money, there are pros and cons to consider before committing to this strategy. Here are some of the pros and cons of mortgage acceleration in Canada:
Pros:
• Pay off your mortgage faster: By making extra payments to the principal balance, you can reduce your loan amount faster and pay off your mortgage sooner. This means you’ll be mortgage-free sooner, saving money on interest and potentially reducing your total loan amount.
• Save money on interest: Making extra payments to the principal balance means you’ll pay less interest overall. This can be a great way to save money, especially if you have a long-term mortgage.
• Increase the equity in your home: By reducing the loan amount faster, you can increase the equity in your home more quickly. This can be beneficial when it comes time to sell your home, as you’ll have more equity to put towards a down payment on a new home.
Cons:
• Can be difficult to keep up with: Making extra payments each month can be difficult to manage, especially if you don’t have a consistent income. It’s important to make sure you can afford the additional payments before committing to this strategy.
• May not be the best financial decision: While mortgage acceleration can be beneficial, it’s important to consider other financial goals and needs before committing to this strategy. For example, if you’re trying to save for retirement or a child’s college education, you may want to consider investing in those goals instead of making extra mortgage payments.
• Not all lenders offer this option: Not all lenders offer the option to make extra payments to the principal balance, so it’s important to check with your lender before committing to this strategy.
Mortgage acceleration can be a great way to save money and pay off your mortgage faster. However, it’s important to consider all the pros and cons before committing to this strategy. Make sure to weigh your options and find the best financial decision for your situation.