Last year I came across an article from Yahoo Finance about how Canadians, with a plan and small sacrifices, can free up years of payments to go towards retirement savings.I can no longer find the article on Yahoo Finance, but I think it’s an important message that not enough Canadians are getting.

While it is important to pay off your high interest debt first (i.e. credit cards, personal loans, higher interest lines of credit etc.), most lenders have multiple ways for borrowers to make payments towards their principal without paying any penalties. These include:

  1. Lump sum payments
  2. Increased regular mortgage payments
  3. Increase frequency of payments (go from bi-weekly to accelerated bi-weekly, for example)
  4. Double up payments

Not all of these options are available with every lender, but most home-owners don’t need to do all of them to make a big impact on their mortgage.

Of those in the CIBC poll of 2012, who paid off their mortgage an average of seven years early than most Canadians, 53% said they skipped large, “unnecessary” purchases, 53 % said they created a budget to track their spending, 49% cut down on extra spending, including restaurant and entertainment costs and 38% skipped vacations.

The full article is available in the May 2012 edition of my newsletter which you can find on my website.