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“Understand the power of a single extra dollar added to your mortgage payment today.”


David Stafford

is managing director of real estate
secured lending at Scotiabank


Following up on its iconic "you're richer than you think" slogan, Scotiabank is tapping into the penny-consciousness of Canadian families with its "small changes, big differences" campaign. While it's a message that can apply to almost every aspect of life, it's particularly powerful when it comes to paying off your mortgage faster – and paying thousands, even tens of thousands, of dollars less in interest in the process.

The key to big savings over the life of a mortgage is "to think about the cost of the mortgage more in dollar terms than in rate terms," says David Stafford, managing director of real estate lending at Scotiabank. "What is that mortgage going to cost you on a monthly payment basis? What is the total cost of interest? If you borrow $100,000, how much will you have to pay back in total?"

It's important to remember that you don't have to make a $10,000 pre-payment to make a difference, he stresses. By regularly making small changes that put the power of compound interest to work for you, "you can easily cut 10 or 15 years off the end of your mortgage," he says. "Most mortgages allow 10, 15 or even 20 per cent pre-payment privileges, which could be $30,000 a year. That can be quite a lot of money, so the key is to keep chipping away at it."


Here are Mr. Stafford's recommendations for turning any mortgage into one that is truly "low interest" – and as short-lived as possible.

Understand the power of a single extra dollar added to your mortgage payment today. "If you don't pay that dollar today, it will be the last dollar you pay off in 25 years. It's only a dollar, but by paying it today, you're saving interest on it every day for the next 20 or 25 years. If you don't, it's the most expensive dollar you borrow.

"If I borrow $100,000 today and make my first mortgage payment a month from now, I've paid only 30 days' interest on the amount that is paid toward the principal. It cost me almost nothing. But on the principal portion of the very last payment I make, perhaps 25 years from now, I've been paying interest for 300 months."

Switch to accelerated bi-weekly or weekly payments. "If your monthly payment is $800, switch to $400 every two weeks. It's the most expensive strategy we recommend, and interestingly, it's the one that the most people apply."

Increase your payments a little bit every year. "If your payment is $400 every two weeks, increase it to $410 a year from today, or go crazy and make it $420. It makes a massive difference – even bigger than bi-weekly payments."

Make small lump sum payments. "A woman at one of our branches told me she took whatever was left in her chequing account the night before payday and put it on her mortgage. When she got up the next morning, her pay was in her account. Some weeks it was $50; some weeks it was $200. When we spoke, she had just paid off her mortgage, years ahead of schedule.

"Other people have told me they go to their online banking site and round their mortgage balance down each week, to the nearest hundred. If the balance is $99,960.52, they pay off the $60.52. Some weeks it's $50, some weeks it's $20 and some weeks it's $85."

Round up your payment. "Don't necessarily set yourself up for the lowest payment you can get. If your bi-weekly payment is $447, ask your lender to round it up to $450 or $500."

At renewal time, put lower interest rates to work for you. "If you renew at a lower rate, and you're living comfortably with your current payment, keep it the same."

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