Traditionally, when purchasing a new home, most homeowners will agree to the standard monthly payment their lender institutes for them. Depending on the homeowner's financial situation, these payments can be adjusted to be bi-weekly, semi-monthly, or weekly, of which some choose based on the most convenient method for them.But there is another layer of payment options available if your primary focus is to pay off your mortgage sooner. 

Accelerated payments increase the number of payments made in one calendar year, significantly increasing the amount of money being applied to the principal balance of your mortgage.

Accelerated Payment Options

The frequency of your accelerated payments is typically offered bi-weekly or weekly. This means instead of making 12 monthly payments per year, you'll be making 26 payments (every two weeks), or if you choose weekly you'll be making 52 payments per year. 

Ultimately, this means your payments are combating the interest accrued on your mortgage, and a larger portion of your payments will be applied to the principal balance.

Shaving Time off Your Mortgage 

The advantages to accelerating your payments can be similar to the advantages of a large down payment. By opting for these accelerated payments, you'll take an average of five years off the time it takes to pay off your mortgage. You'll also save tens of thousands of dollars in interest on your amortization period. 

This is especially useful if you purchase later in life and have less time to pay off your home before retirement, or if you're building custom when you're in your twenties and simply don't want to take 25 to 30 years to fully own your home.

Difference Between Regular and Accelerated Payments 

Accelerated payments are typically a higher payment amount than regular payments based on how they are calculated. This does mean you'll be paying more for your payment now, but you'll outright own your home much sooner. 

The difference between the payments, depending on the value of your mortgage, can be around $100 or less per payment. Depending on your financial situation, this may not be a big deal to which you can commit. For the price of a Starbucks frilly coffee a day, you can own your home half a decade sooner. And you'll save roughly $25,000 in interest.

It's Not Permanent If You Don't Want It to Be 

If you decide to move forward and change your payments to accelerated, it's not a commitment that's bound by the lifetime amortization of your mortgage. Whether it's when you're looking at renewing and renegotiating your mortgage, or at any point you can't afford the higher payments anymore, most Canadian lending institutions will have no problem changing your payments back to regular ones. 

If you're in a bit of trouble, too, most major banks also offer a "skip-a-payment" type of benefit on your mortgage so if you need some time to readjust your payments, you can take advantage of this as well. Not everyone has this benefit, though, so be sure to check your mortgage agreement first.

How Accelerated Payments Benefits You Sooner 

This type of mortgage payment not only benefits you in the long run, but you reap the benefits in the short term as well. Because you're applying more payment toward the principal balance on your mortgage, when it comes time to renew your term, you'll owe less on your home and have more equity.

This gives you negotiating power over your interest rate, term, and any additional incentives your lender may wish to offer you to keep your business or earn it.

You'll gain equity far faster in this manner as well, creating more opportunities to use your home equity for other lines of credit if needed. And if you choose to sell your home, you'll have the upper hand against other sellers in the area by having more negotiating room on your home's value.

There are many benefits to opting for accelerated payments on your mortgage. Although it costs you more up front, it creates a far stronger financial position for you and your family, and puts you in a better situation for your short and long term goals. 

To obtain actual projections of savings based on your specific circumstance, speak to your lender. They'll be able to provide you details on how much money you'll save, and how early you can pay off your home entirely.

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