Recent stats from Stats Can put the levels of household debt at a staggering $1.93 trillion. While this figure represents all kinds of debt (i.e. credit cards, mortgage and non-mortgage loans), mortgage debt has been identified as a major driver behind these climbing debt levels.
This is in part because a combination of low interest rates and escalating property prices are resulting in people taking out more and more mortgage debt.
‘When it comes to mortgage debt especially, Canadians need to focus on how they can pay mortgage faster, reduce their debt load, not on how they can get more money to buy more house,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
“While many people may justify mortgage debt as ‘good debt’ because it helps you buy an investment, even ‘good debt’ threatens your financial well-being if you are spending beyond your means,” says Schwartz.
Here are some tips on how to reduce your mortgage debt.
Make your mortgage a priority
You may already have your household budget mapped out, but you may want to tweak it to find some extra cash that you can put down on your mortgage. Every little bit counts.
Let’s say that you take the next year to aggressively pay down your mortgage. Consider what sacrifices you might be willing to make during that period to take a chunk out of that debt. Maybe have a staycation this year, and bank that money that you usually earmark for holidays. Commit to having date night in for a year or brown bagging your lunch at work every day. You’d be surprised how these small amounts, when combined over a period of time can help a lot.
Pay mortgage faster
It’s likely that your lending institution will offer a number of features on your mortgage to help you pay it down. It’s a good idea to take advantage of these options if you are able and pay mortgage faster; typically these payments go to paying down your actual mortgage principal, rather than principal and interest, which means reducing your actual mortgage debt.
Some common features include match-a-payment, which lets you double up on your payments (the amount of times you can do that in a year may vary, depending on your lender); you are often also allowed to make a lump sum payment on the anniversary of your mortgage without penalty.
Another option you have is to reduce your mortgage amortization. This will reduce your mortgage loan at a rapid rate, but be careful that you’re not stretching your budget too thin in doing so. Reducing your amortization will increase your payments, but will greatly reduce the interest you pay out over the life of your mortgage.
Know your renewal options
When your mortgage is up for renewal, don’t just blindly sign the documents. Shop around for the best rate and most features (i.e. repayment) because there is financial benefit there too.
Is a huge debt load threatening your ability to hang on to your house? Maybe you’ve encountered some life events that have thrown your finances out of whack? Perhaps you’ve been spending beyond your means, and find that you’ve reached the breaking point. We can help. Call one of our trained credit counsellors at or visit our free online debt analysis.