Question 1

Should I choose accelerated bi-weekly or monthly mortgage payments?

Accepted Answer

Accelerated bi-weekly is almost always the better choice. Here is why: with monthly payments, you make 12 payments/year. With accelerated bi-weekly, you make 26 payments of exactly half the monthly payment — equivalent to 13 monthly payments each year. That one extra payment/year goes entirely to principal. On a $500,000 mortgage at 5% over 25 years, accelerated bi-weekly saves approximately $35,000 in interest and reduces amortization by nearly 3 years. Regular bi-weekly (non-accelerated) simply splits your monthly payment in half — no extra annual payment, no material savings. Always request "accelerated" when choosing frequency. There is no downside — the extra payment is automatically built into your budget by your payment schedule.

Question 2

Can I make lump-sum mortgage payments in Canada?

Accepted Answer

Yes — most Canadian mortgages include prepayment privileges, but the rules vary by lender and product. Typical prepayment terms: 10–20% of the original principal per calendar year as a lump sum (not the current balance), and 10–20% increase in regular payment amount. These are annual privileges — they reset January 1 each year. On a $500,000 mortgage, a 15% privilege allows $75,000 in annual lump-sum payments. Timing matters: most lenders apply lump sums only on payment dates (not anytime). Check your mortgage contract — Variable Rate Mortgages (VRM) almost always have more generous prepayment terms than fixed-rate closed mortgages. Prepaying beyond the privilege triggers a prepayment penalty (3 months interest on variables, IRD on fixed).

Question 3

What happens if I miss a mortgage payment in Canada?

Accepted Answer

Missing one payment is not immediately catastrophic, but act quickly. Most lenders allow a payment deferral once per mortgage term for genuine hardship if you call before the due date. After the missed payment: (1) You may be charged an NSF fee ($45–$95). (2) If 30 days past due, it may appear on your credit report. (3) At 90 days past due, the lender will typically begin formal default proceedings. (4) Power of sale/foreclosure can begin after 3–6 months of default, varying by province. Contact your lender immediately when you anticipate a problem — COVID showed lenders will defer rather than foreclose in most cases. Also check if you purchased mortgage disability insurance or have critical illness insurance that covers your payments.

Question 4

Should I pay off my mortgage early or invest the extra money?

Accepted Answer

This is a math question with a behavioral answer. Mathematically: compare your mortgage rate (e.g., 5%) to expected after-tax investment returns (e.g., 7% in a TFSA or RRSP). If your expected after-tax investment return exceeds your mortgage rate (which it has historically in a diversified portfolio), invest. Behaviorally: debt-free homeownership has a guaranteed return equal to your mortgage rate — guaranteed in a way that stock markets are not. Most financial planners recommend: (1) Always maximize any employer RRSP match first (instant 50–100% return), (2) then contribute to TFSA, (3) then split remaining surplus between mortgage prepayment and additional investing. Paying down a mortgage aggressively makes the most sense as you approach retirement, when sequence-of-returns risk becomes significant.

Frequency	Payments/Year	Effect	Best For
Monthly	12	Baseline	Simplicity
Semi-monthly	24	No material savings	Payroll alignment
Bi-weekly (regular)	26	No material savings	Payroll alignment
Accelerated bi-weekly	26	~1 extra payment/year	Most homeowners
Weekly (regular)	52	No material savings	—
Accelerated weekly	52	Same as accelerated bi-weekly	Weekly-paid workers

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