Equity is what gives you options, whether that’s better mortgage rates, flexibility in a tough year, or money for your next goal. You can’t control the market, but you can control how quickly you pay down what you owe.
1. Use your prepayment privileges
Most mortgages let you pay extra each year without a penalty, by increasing your regular payment, making a lump-sum payment, or both. The limits vary by lender, so check your mortgage documents. Every extra dollar goes straight to principal.
2. Switch to accelerated payments
Accelerated biweekly or weekly payments add up to the equivalent of one extra monthly payment each year, which can shorten your amortization noticeably over time.
3. Choose a shorter amortization when you renew
A shorter amortization means higher payments, but much more of each payment goes to principal. Only do this if the payment stays comfortable.
4. Put windfalls to work
Tax refunds, bonuses and inheritances can make a meaningful dent if applied to your mortgage, within your prepayment limits.
5. Avoid re-borrowing
Repeatedly drawing on a line of credit or refinancing to cover spending erodes the equity you’ve built. If you do borrow against your home, have a plan to pay it back. See the risks of borrowing against your home.
6. Renovate wisely
Improvements that add lasting value can raise your home’s worth, while maintenance protects it. See using equity for renovations.
7. Keep your rate competitive
At renewal, compare offers rather than signing the first one. A lower rate means more of each payment goes to principal.
Balance it with other goals
Paying down your mortgage faster is one good use of money, but not the only one. An emergency fund, retirement savings and paying off higher-interest debt may come first. An accountant or financial planner can help you set priorities.
Track your progress
Check your equity once a year. See how to calculate your home equity and how Alberta home prices affect your equity.
This article is general information, not financial or legal advice. Lender requirements, rates and fees change and depend on your situation.