Almost everyone takes out a mortgage with one aim in mind—paying it off. At first, that day might seem like a long way off. When you buy your first home on Vancouver Island, for example, you might prioritize the lowest possible monthly payments to make it more affordable in the short-term.  

As you move through life, things change. Your income might fluctuate or you might come into a large sum of money. You might start a family or need to fund university tuition. Maybe you want more financial certainty as you get closer to retirement. Changing the amount and frequency of your mortgage payments is a great way to save on interest, be mortgage-free sooner, or just adapt your mortgage to any life changes.

The important thing to know is that there are only two times you can make changes to your payment without incurring a penalty. Read on to find out when. 

What are your mortgage payments?

When you take out a mortgage, you borrow an agreed amount, such as $350,000. That is your mortgage principal. You pay back that principal, plus interest and any other costs, over a set period of time, such as 5, 10, 20, or 25 years. These are your mortgage payments, typically paid on a monthly or biweekly basis. 

The amount of principal, your interest rate, and the length of your mortgage determine how much leaves your bank account when each payment is due. The faster you reduce your principal, the less interest you pay and the sooner you'll be mortgage-free (break out the party hats).

Why change your payments?

You might be happy with what you're paying each month. Or, changed circumstances may mean it's time to renew your options, which can include: 

• Increasing your payments thanks to a change in your financial situation, such as a pay rise or inheritance, to pay off your mortgage sooner and save on interest—this gives you the biggest bang for your buck
• Changing your payment frequency, for example from monthly to bi-weekly (or vice versa,) to reflect when you get paid 
• Reducing your mortgage payments in the wake of big life changes, such as a new baby or your kids reaching university age, to improve your cash flow

While reducing your payments won't make you mortgage-free sooner, it can help you free up money for other expenses. Then, at your next renewal or on a future mortgage anniversary, you can increase your payments again to start paying down your mortgage faster. 

Increasing your payments, on the other hand, can have a dramatic effect. Here's an example: With a $350,000 mortgage, 25-year amortization, and biweekly payments of $800 at an interest rate of 3.5%, a payment increase of just $50 a month will shave over two years off your mortgage and save you almost $47,000 in interest.

Good to know: Another way to pay down your mortgage faster is by making lump sum payments. You can also do this penalty-free at renewal time and on each mortgage anniversary. Read Making a lump sum payment.

When to change your payments

You can change your mortgage payments any time, but there are just two occasions when you can take advantage of a penalty-free change:

1. At the end of your mortgage term when you renew
2. Each year on or after the anniversary of your mortgage

When you renew your mortgage you can increase your payment to any amount with no penalty. On or after each mortgage anniversary you can as much as double your monthly mortgage payment to shave years off your mortgage term and save potentially thousands in interest—again with no penalty. 

How to change your payments

A good first step is to review your finances in advance, including your monthly budget. A CCCU financial advisor can help you with that. You can also use our mortgage calculator to crunch some numbers to see what you can save.

When your current mortgage term ends, and/or your annual mortgage anniversary comes around, talk to us about changing your mortgage payments to make them work better with your current situation, or to shorten your mortgage and save big. You can also learn about renewing and refinancing your mortgage here.