The Canadian housing market has been one of the strongest in the world over the past few years, and as a result, many Canadians are taking advantage of the low mortgage rates to purchase their dream home. But what many homeowners don’t realize is that making extra mortgage payments can have a number of benefits. Here’s a look at some of the advantages of making extra mortgage payments in Canada.
1. Lower Interest Payments: One of the most obvious benefits of making extra mortgage payments is lower interest payments. By making extra payments, you’re essentially paying down the principal balance of your loan faster, so you owe less interest over the life of the loan. This can add up to thousands of dollars in savings over time.
2. Faster Equity Accumulation: By making extra payments, you’re also building equity in your home faster. Equity is the difference between the market value of your home and the amount you owe on your mortgage. As your equity increases, so does the amount of money you can borrow against your home if you ever need to.
3. Shorter Loan Term: Making extra payments can also help you pay off your mortgage faster. When you make extra payments, you’re essentially paying down the principal balance of your loan faster, so you can pay off the loan sooner and save on interest over the life of the loan.
4. Lower Tax Bills: Another benefit of making extra payments is the potential to reduce your tax bill. If you’re eligible for the Home Buyers’ Plan, you can use the extra payments to pay down your mortgage faster and reduce the amount of interest you owe for tax purposes.
Making extra payments on your mortgage can be a great way to save money and build equity in your home. It’s important to make sure you understand the terms and conditions of your mortgage before you make extra payments, as well as any potential tax implications. But if you’re able to make extra payments, the benefits can be well worth the effort.