Should Montreal Homeowners Make Extra Mortgage Payments?

Should Montreal Homeowners Make Extra Mortgage Payments? Hi, it's Bridge Hennessey, and if you are like me, saving money is on your mind, so here's a story to learn how. It felt incredible for Alex and Jamie Rousseau to finally move into their first home in Rosemont, but the reality of being “partners” with a Montreal bank, thanks to their $600,000 mortgage at 4.7% interest, settled in quickly. With a 30-year loan, a major slice of their income would go straight to the lender, unless they acted.

Inspired by Alex’s sister, who said that sending just one extra mortgage payment per year (about $3,800) could slash nearly $170,000 from the total interest and let them pay off the house almost 6 years faster, they started setting aside money to make it happen. But is making extra payments really the smartest financial move? Can small changes like these significantly impact the bottom line?

It’s Math, not magic! Many people find compound interest a tough concept to grasp, which makes strategies like these seem almost miraculous. In reality, the math is clear: making extra payments early in a residential property's mortgage means saving decades of interest. For example, if Alex and Jamie send the bank $3,800 in year one, they save roughly $21,000 in interest over 30 years. The same payment sent in the 29th year only saves a couple hundred dollars. Early payments are far more powerful.

Could Your Money Work Harder Elsewhere?

The urge to pay off a mortgage quickly often focuses on money lost to interest.

But it’s worth asking: could investing those extra dollars instead yield better results?

If Alex and Jamie put their yearly $3,800 into a balanced mutual fund averaging 8–10% returns, they could end up with over $600,000 after three decades, plus their paid-off home. In comparison, making extra mortgage payments could leave them with only about $350,000 in savings after the mortgage is gone.

Still, it’s critical to remember that mortgage payoff is a guaranteed return equal to the interest rate, while returns on investments fluctuate. Over a long period, like a home loan, investing in something like the S&P/TSX index tends to minimize that risk, but there are no absolute guarantees.

Flexibility and Liquidity Matter

Even if an investment isn’t projected to significantly beat the mortgage rate, keeping funds liquid can be valuable. Locking money into a home’s equity may feel responsible, but it means less cash on hand for emergencies, job loss, career change, or family milestones. If Alex or Jamie need funds ten years into their mortgage, their home equity is harder to access quickly than a liquid investment account.

Finding the Right Fit for You

Good advisors know there’s no universal answer: the “best” financial strategy depends on personal habits and circumstances. If paying off the mortgage faster excites Alex and Jamie and motivates them to save, then it’s a valid strategy. Some folks find it tough to keep investment accounts untouched; home equity is much less tempting to raid. If you feel empowered by reducing debt and monthly payments, focus on paying down the mortgage.

If you’re disciplined and want flexibility, prioritize saving and investing.

Three Montreal Mortgage Tips:

If you want to get ahead on your mortgage, consider this practical advice:

• Check with your lender: Most Canadian banks allow extra payments, but confirm your contract if that is your intent.

• Ensure the extra money goes to principal, not prepaying next month’s bill.

• Avoid third-party “mortgage payoff” companies or services charging big fees for sending payments, this is easily managed yourself. Whether you’re aiming to build home equity, boost your investment portfolio, or both, make sure your approach is tailored to your lifestyle and financial goals. If you need advice navigating Montreal’s evolving mortgage scene, don’t hesitate to reach out.

Thanks for reading, keep being inspired!

Bridge