Should i pay off my mortgage with lump sum payments?

[djacobox372]

I meant to clarify that my mortgage interest rate is only 1.7% until April 2026, so my payments will go up significantly from there

Why in the hell would you even consider paying extra on a 1.7% loan with interest you can write off on your taxes?

WTF?

Just invest the money in something that pays more than 1.7% instead (which is basically anything), and if they jack your interest rates beyond what you can get in the market, pay it off then.

 

[djacobox372]

I'd say pay extra while the % is small. I got exprience with these things....

The financially illiteracy of folks on this forum is astounding.

 

[Contempt]

I meant to clarify that my mortgage interest rate is only 1.7% until April 2026, so my payments will go up significantly from there

Your interest rate is at like a quarter of the level of inflation... and over here you can get far higher interest rates on savings accounts than 1.7% so paying off anything extra on the mortgage before April 2026 makes zero sense.

 

[Blunderbuss]

Why in the hell would you even consider paying extra on a 1.7% loan with interest you can write off on your taxes?

WTF?

Just invest the money in something that pays more than 1.7% instead (which is basically anything), and if they jack your interest rates beyond what you can get in the market, pay it off then.

I can only pay up to 15% of my original total loan amount per year (thus the $28k number). If I were to try and pay it all off after the interest increases in 2026, I'd be subject to a penalty. I am Canadian, so maybe that is what is differing from a few comments I've seen in this thread. I'd happily pay it all off after that, but it would cost an extra 10k or something. That's why I would go for these incremental payments leading up to the rate increase.

 

[Blunderbuss]

Your interest rate is at like a quarter of the level of inflation... and over here you can get far higher interest rates on savings accounts than 1.7% so paying off anything extra on the mortgage before April 2026 makes zero sense.

At my current payment structure, by April 2026, I'll owe $105K on my mortgage still. At that point, I'll be in another 5 year fixed mortgage but at higher payments (presumably, if interest rates don't decrease too too much). I can only pay up to $28k a year because any higher will incur penalties (as stated in my post above. I don't know if it is a Canadian thing or a bank thing. I think Canadian thing). So the early lump sums would be to either keep my payments static or lower, or to be able to pay it off altogether within the alloted time and percentage points I can use.

We do make back on interest in savings accounts though, yes.

 

[Batjester]

Burn the house down and start a new life.

Keep wife and baby Buss though.

And the cats.

 

[lsa]

Burn the house down and start a new life.

Keep wife and baby Buss though.

And the cats.

especially the cats...

 

[Oblivian]

At my current payment structure, by April 2026, I'll owe $105K on my mortgage still. At that point, I'll be in another 5 year fixed mortgage but at higher payments (presumably, if interest rates don't decrease too too much). I can only pay up to $28k a year because any higher will incur penalties (as stated in my post above. I don't know if it is a Canadian thing or a bank thing. I think Canadian thing). So the early lump sums would be to either keep my payments static or lower, or to be able to pay it off altogether within the alloted time and percentage points I can use.

We do make back on interest in savings accounts though, yes.

I think it's hard for many to wrap their head around your loan structure because it is either so much different than in the US or you aren't explaining well. You are at a ridiculously low rate right now that most would never see. How the hell did that happen? What are the exact terms of the increase for April 2026? Here, for example, a loan may be 1.7% above 10 year US treasury yield.

I see what you are trying to do, but everything depends on the change in rate.

 

[cmw43]

Hahaha, ah I was bored at work and thinking about it so i figured why not see what people thought. I keep our financial situation pretty close to the vest so I couldn't really get advice from any friends of mine. I just find sitting down with a financial advisor so incredibly uncomfortable. But you're right though

Make sure you do you research on your financial advisor, I used to work in insolvency and the number of financial advisors that go insolvent is shocking.

 

[Jack Reacheround]

Did you get a variable rate mortgage? If so, why?

Also, who pays their mortgage on a weekly basis? Wtf kind of loan shark offered you that deal.

Third, yes. Pay it down as fast as possible. That way you aren’t paying so much in interest. This will mean more money for you overall, in the long run.

 

[djacobox372]

I can only pay up to 15% of my original total loan amount per year (thus the $28k number). If I were to try and pay it all off after the interest increases in 2026, I'd be subject to a penalty. I am Canadian, so maybe that is what is differing from a few comments I've seen in this thread. I'd happily pay it all off after that, but it would cost an extra 10k or something. That's why I would go for these incremental payments leading up to the rate increase.

Really???? I've never heard of a loan that you couldn't pay off whenever you wanted to.. what if you need to sell? how does that work?

Maybe move to a real country...

 

[val_lixembeau]

I think it's hard for many to wrap their head around your loan structure because it is either so much different than in the US or you aren't explaining well.

In Canada, mortgages are only for a few years at a time. So every five years or so (or whatever the term was) borrowers end up with a new interest rate even for "fixed-rate" mortgages.

 

[val_lixembeau]

50% sounds insane! Are you not in the US?

No, that was a complete braino on my part, I don't know what I was thinking when I wrote that. It only feels like 50% haha.

My real rate is in the high thirties. I used to live in Hong Kong though where my marginal rate was something like 16%, sigh.

 

[jx820]

I would consult with a financial advisor instead of taking advice from a bunch of knuckleheads on an MMA forum.

In the US most financial advisors have no fiduciary responsibility and can (likely will) talk you into whatever product makes them the most money.

You should only ever consult with a fiduciary financial advisor. A CFP now has that built into their code of ethics, but even a CFP can be a complete hack. They can get certified in a few months.

Just be careful.

 

[Michaelangelo]

In the US most financial advisors have no fiduciary responsibility and can (likely will) talk you into whatever product makes them the most money.

You should only ever consult with a fiduciary financial advisor. A CFP now has that built into their code of ethics, but even a CFP can be a complete hack. They can get certified in a few months.

Just be careful.

Also pay them a flat fee instead of a percentage

 

[Michaelangelo]

In Canada, mortgages are only for a few years at a time. So every five years or so (or whatever the term was) borrowers end up with a new interest rate even for "fixed-rate" mortgages.

What a scam

 

[Fluffernutter]

My first job out of college was teaching at a boarding school. I didn't have to pay rent and I had all of my meals in the dining hall (even if I wasn't on duty).

Because I had no expenses outside of my college loans, I wrote checks much larger than what my monthly plan suggested. As a result, I was able to pay them off in undeer four years.

So, yes, I suggest you pay down your mortgage

 

[SummerStriker]

There are times and places when bonds over performed the stock market, and the stock market was negative over 30 years. America has had the best stock market returns in history due to coming out on top in multiple, risky situations like WW2 and the Cuban Missile Crisis, in which we got lucky and investors were rewarded. I think that it is unwise to guess that the future will mirror the past for stock returns, and we will only know the best portfolio to have in hindsight. Obviously talking to a financial advisor is the best idea, but you have to make sure that your decision to pay off the home early is compared to making regular payments and investing the difference.

I personally thinking being debt free on a house feels the best and gives the best freedom. Your primary residence is your most protected asset. For example, you have a big medical bill and lose everything--they probably won't get your paid off house. If you retire with nothing but social security and a paid off house, you'll probably be alright. If you choose not to pay off the house but then spend, instead of invest, the money you'd have been better off paying off the house.

If CNBC tricks you into selling stocks at the wrong time and meddling with your investments or dabbling in market timing, you're better off paying off the house. CNBC only needs to trick you once in 30 years to really fuck you.

If I were you, I'd talk to an advisor, especially when dealing with that much money. It is worth a couple hundred bucks to know what they think, so long as you get a good guy.

 

[KBE6EKCTAH_CCP]

So as you all are aware, interest rates are fucked right now. They may start to lower a bit in the near future, but who knows by what amount or when.

So my mortgage right now is down to only $122k. Not too bad, payments are only $254 a week including the property tax. We've managed to set aside about $135k in disposable savings. We just had a baby girl and really wanted to make sure we would be set. So now baby is 2 months old, things are going great and we are still accumulating wealth, so my question is: do I start just paying down my mortgage? I can pay up to $28k a year in lump sums, so with my regular payments, I could have it paid off in 4 years. Of course disaster could strike at any time, I could lose my job, car could break, house could flood (it flooded a couple years ago after all). I've been grappling with this for a few months, and my wife keeps asking me what I'm thinking about it. Should I just stay the course for the remaining 13 years of my mortgage? Make smaller lump sums but keep enough just in case? Burn the house down and start a new life?

FInancially you are better offinvesting that money ar higher rates.
Psychologically for some people paying debt is a plus.
Do a balanced approach? Assuming you will keep on saving, pay off the yearly 28K or so and invest the rest.

 

[KBE6EKCTAH_CCP]

There are times and places when bonds over performed the stock market, and the stock market was negative over 30 years. America has had the best stock market returns in history due to coming out on top in multiple, risky situations like WW2 and the Cuban Missile Crisis, in which we got lucky and investors were rewarded. I think that it is unwise to guess that the future will mirror the past for stock returns, and we will only know the best portfolio to have in hindsight. Obviously talking to a financial advisor is the best idea, but you have to make sure that your decision to pay off the home early is compared to making regular payments and investing the difference.

I personally thinking being debt free on a house feels the best and gives the best freedom. Your primary residence is your most protected asset. For example, you have a big medical bill and lose everything--they probably won't get your paid off house. If you retire with nothing but social security and a paid off house, you'll probably be alright. If you choose not to pay off the house but then spend, instead of invest, the money you'd have been better off paying off the house.

If CNBC tricks you into selling stocks at the wrong time and meddling with your investments or dabbling in market timing, you're better off paying off the house. CNBC only needs to trick you once in 30 years to really fuck you.

If I were you, I'd talk to an advisor, especially when dealing with that much money. It is worth a couple hundred bucks to know what they think, so long as you get a good guy.

Excellent point. People lose money on investments, frauds, etc. If you invest intelligently it won't happen but NOTHING is safer than paying off debt on your primary residence, which you can always re-leverage if you want.

Lastly, we are talking about roughly 100K of lump sums over 4 years at 1,5%. Safe investments yield what, 4% in the US? He'll end up with 3K more of taxable income, which isn t worth the headache.

My vote is to go for the lump sums.