Pay Mortgage Early

On occasion, perhaps through a windfall or through prudent, long-term savings, couples have an opportunity to pay mortgage early. The reasons for doing it are as much emotional as they are financial. Peace of mind is one of the most significant benefits of pay mortgage early. While there is usually no tax benefit in paying off the mortgage early, paying off the mortgage is one of the most desirable ways to use extra funds. The biggest financial advantage is that you end up with a guaranteed, risk-free return, because you no longer have to pay out the amount of money you've been paying in interest.

If you can, pay mortgage early and then go on paying yourself (savings) an amount equal to the mortgage payments. If you have a need for liquidity you may want to pace yourself in paying off the loan early. Once that income stream is reliable, consider investing 50% of that amount in interest-bearing investments that are consistent with your long term plans or your personal investment philosophy.
As well as choosing the mortgage with the right features, you also need to decide which repayment method is right for you. There are two main methods of paying off your mortgage: Repayment and Interest-Only.

With an interest-only mortgage, your monthly repayments cover only the interest and not the outstanding debt. As you do not repay any of the actual capital each month, you need to save separately to pay mortgage early at the end of its term. There are several different ways to do this. These are an endowment policy, and individual savings account (ISA), a pension plan or money coming from another source. More people are becoming aware that, since mortgage interest is not tax-deductible in Canada you are making mortgage payments of both principal and interest with money that you've already paid tax on - "after tax dollars".