Seven Strategies to Reduce Your Total Mortgage Cost

Each strategy has a measurable impact on your total mortgage cost. Taken individually, they generate significant savings. Combined, they can radically transform your financial trajectory and save you tens of thousands of dollars. The key is understanding how each works and implementing them progressively according to your financial capacity.

The seven strategies in detail

1. Switch to accelerated bi-weekly payments: Accelerated bi-weekly divides your monthly payment by two and has you pay it 26 times per year, which equals 13 monthly payments instead of 12. This extra payment is applied directly to principal. On a $400,000 loan at 5% over 25 years, this single strategy saves about $40,000 to $50,000 in interest and reduces amortization by 2 to 4 years. The change is free at most lenders and can be made at any time.
2. Maximize annual prepayments: Most Quebec mortgage contracts allow an annual lump-sum payment of 10 to 20% of the original balance. Every dollar of prepayment directly reduces principal, eliminating future interest on that amount for the entire remaining loan period. A $10,000 prepayment at the start of a loan can save more than $14,000 in total interest.
3. Increase payments by 10 to 15% at each renewal: Instead of keeping the same payment at renewal, increase it by 10 to 15%. This increase is often easily absorbed thanks to accumulated salary raises. The compound effect is remarkable: each increase accelerates principal repayment, which reduces interest in the following period.
4. Negotiate a better rate at renewal: Never sign your lender's renewal offer without having it verified by an AMF-certified broker. Lenders often send a retention rate higher than the best available rate. A broker compares offers from over 20 lenders and negotiates on your behalf. Each 0.25% reduction represents thousands of dollars over the term.
5. Shorten amortization at each renewal: Going from 25 to 20 years of amortization increases the monthly payment but saves tens of thousands of dollars in total interest. If you can afford a slightly higher payment, shortening amortization is one of the most effective strategies for reducing the overall cost of your mortgage.
6. Consolidate high-rate debts: If you have credit card debts at 19-21% or a personal loan at 8-12%, consolidating them into your mortgage at 4-5% eliminates costly interest. For example, $20,000 in credit card debt at 20% costs $4,000 per year in interest. Integrated into the mortgage at 5%, the cost drops to $1,000 per year. However, this strategy requires refinancing and should be evaluated with a broker.
7. Plan lump-sum payments at anniversary dates: Prepayment privileges renew at each contract anniversary date. Plan a lump-sum payment on that date, even a modest one, every year. Use bonuses, tax refunds, or accumulated savings. A regular amount of $5,000 to $10,000 per year makes a considerable difference over the life of the loan.

Where to start

If you cannot do everything at once, start with accelerated bi-weekly payments, as the change is free and immédiate. Next, maximize annual prepayments with available surplus. At the next renewal, negotiate the best possible rate and increase your payment. An AMF-certified broker models the combined impact of these strategies with your exact data and helps you prioritize actions according to your financial situation.