In today’s challenging financial climate, almost everyone with a mortgage would love to pay it down faster.
Aside from interest relief, accelerated payments can help you fully own your home sooner and free up your resources — but what are the best payment methods and strategies at your disposal?
Let’s take a look, with some added wisdom from Meridian Mortgage expert Mike Healy.
Cost of living: still rising, but at a slower rate
When you’re contemplating interest rates, cost of living, and mortgage payments, it’s always wise to start with some concrete stats* to add context:
- The rise in the cost of living in Canada has slowed somewhat from the dizzying heights of 2022, when Canadians were challenged by a 40-year high in the Consumer Price Index (CPI) – a 6.8% annual average increase
- The equivalent CPI increase was 3.9% in 2023 and 2.4% in 2024
- Even though growth in Bank of Canada interest rates began easing in the middle of 2024, they remain high compared with the pre-Covid years
*Source: The Daily — Consumer Price Index: Annual Review, 2024
So, what does all this mean for mortgages?
Costs continue to rise and paying a mortgage down faster will always be beneficial, but are some methods better than others in 2025? First, let’s look at the tried-and-true ways to accelerate mortgage payments:
1. Switch from monthly to bi-weekly
If you currently pay monthly, switching to bi-weekly means you’ll make the equivalent of one extra monthly payment a year. This will significantly reduce the amount you owe over time and can take years off your mortgage.
For a look at specific numbers, see how much you could save via bi-weekly payments using our mortgage payment calculator.
2. Increase the payment amount
If your budget indicates that you can afford to increase your mortgage payments, consider talking to your lender about it. At Meridian, you can pay up to 20% more of your mortgage each year with a combination of lump-sum payments toward the principal and increases to your monthly payment.
3. Make lump-sum payments
Lump-sum payments allocated to the mortgage principal can make a big impact in the long run. Consider using your tax refund or annual bonus for this purpose but be aware that annual lump-sum limits are usually built into mortgage contracts. If you choose to exceed the limit, a financial penalty will apply. Here’s a good overview of these kinds of penalties and how they’re calculated in Canada.
4. Refinance? Switch lenders?
When you are nearing the end of your mortgage term, you’ll have opportunity to negotiate a better interest rate with your lender, move from a variable rate to a fixed rate, or switch lenders altogether for an improved interest rate and/or more flexible terms. Find some in-depth Meridian expertise on switching lenders here.
What’s your best acceleration strategy?
Looking beyond the basics, here are some more financially advanced ways to approach mortgage payments in 2025 and beyond.
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Higher payments vs. lump-sum payments. If you can’t do both, which is best? It may come down to the amount of flexibility that your lender allows. For instance, lump-sum payments may be allowed only at specific times, such as before the end of your term, at the end of your term, at certain times during your term, or on certain dates set out in your contract. Also, keep in mind that once you increase your payments, you typically can’t lower them until the end of the mortgage term, so be sure that higher payments are sustainable before you increase them.
“If you anticipate receiving a large sum of money in the future and plan to use it to pay down your mortgage, choosing a variable-rate mortgage over fixed-rate could be a strategic advantage,” Mike Healy points out. “That’s because lump-sum penalties are generally smaller with variable-rate mortgages when you exceed the typical 20% annual lump-sum limit.”
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Weekly vs. bi-weekly vs. accelerated weekly. Yes, there are payment plans that are even more accelerated than bi-weekly. Beyond the monthly option, your lender may be flexible enough to allow for any or all of the following:
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Semi-monthly — two payments per month (monthly payment ÷ 2)
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Bi-weekly — one payment every two weeks (monthly payment X 12 ÷ 26)
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Weekly — one payment per week (monthly payment X 12 ÷ 52)
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Accelerated bi-weekly — one payment every two weeks (monthly payment
÷ 2)
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Accelerated weekly — one payment per week (monthly payment ÷ 4)
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“There’s an important difference between bi-weekly payments and accelerated bi-weekly payments that’s often misunderstood,” says Mike Healy.
“With standard bi-weekly payments, you make 26 payments per year. Each one is slightly less than half of a regular monthly payment, because the monthly amount is divided evenly across 26 payments instead of 24. As a result, there’s no real acceleration in your mortgage payoff, and the interest savings are minimal.”
But with accelerated bi-weekly payments, your monthly payment is simply divided in half and paid every two weeks, resulting in 26 slightly larger payments over the year.
“This essentially adds the equivalent of an extra monthly payment annually, which goes directly toward your principal,” Healy continues. “Over time, this reduces your amortization period and significantly cuts down the total interest paid over the life of the loan.”
It’s also worth noting that accelerated bi-weekly payments do not impact your 20% lump sum privilege. It remains fully available for additional principal reductions if your financial situation allows.
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Accelerate variable-rate payments vs. fixed-rate payments. One benefit of a variable-rate mortgage is that you can potentially take action when interest rates go up or down. So, if interest rates drop and your variable-rate monthly payments drop along with them, you may have the option to leverage this positive change by increasing the amount or the frequency of your payments in line with what is allowed by your lender. This way, your accelerated payments will make an even bigger difference while you’re accruing less interest.
Want to uncover even more about mortgages?
To connect with us for a deeper conversation on your best mortgage strategies, make an appointment with a Meridian Mortgage specialist.
Learn more about mortgage basics
Help for first-time home buyers