Columnist image
Pattie Lovett-Reid

Chief Financial Commentator, CTV


Most would love a home but I’ve never heard anyone say they would love a mortgage. Sean Cooper, author of the new book "Burn Your Mortgage," made headlines around the world when he paid off his mortgage in three years at age 30. Sean has always been driven by a passion for financial freedom, but achieving success didn’t just happen. It takes hard work and a lot of discipline, but he did it.

I had a chance to chat with Sean, and while he highlights the importance of tracking expenses, and having a budget and sticking to it, he also focuses on a big misconception - the frequency of your monthly payment versus accelerating your mortgage payments.

Here is what Sean had to say:

"There’s a common misconception about payment frequency. Many people think that how often they make a mortgage payment plays a larger role in interest savings than it actually does (in fact, it plays a small role.) It’s the accelerated alternatives that save you the big bucks. When you pay weekly (52 payments per year) or bi-weekly (26 payments per year) instead of monthly (12 payments per year), the interest savings are minimal; in these scenarios, it’s more about finding the payment frequency that best matches your cash flow. With accelerated weekly (52 payments per year) and biweekly (26 payments per year), you’re paying the equivalent of an extra month’s payment every year (more on this below)."

"At first glance, you’re probably wondering how you’re saving any interest with accelerated weekly or biweekly. After all, you’re still making the same number of payments as non-accelerated weekly and biweekly. While that may be true, you’re actually paying a slightly higher amount on each mortgage payment. To understand this, it helps to look at the difference in the way biweekly and accelerated biweekly are calculated."

"If your monthly mortgage payment is $1,418 and you pay biweekly, your biweekly payment is $654 ($1,418 × 12 months/26 weeks = $654). But when you pay accelerated biweekly, your biweekly payment is slightly higher, at $709 ($1,418 × 12 months/24 weeks = $709). As mentioned, with accelerated weekly and biweekly, you’re paying the equivalent of 13 monthly mortgage payments instead of only 12." 

"Paying accelerated on a biweekly schedule that matches your payday is the most painless way to budget for the higher payment. You won’t even realize you’re making higher annual payments (it’s probably a good thing, as you might not choose this option if you did)."

Here are three of his best mortgage-burning strategies:

1. Know the terms of your mortgage. There’s more to a mortgage than just the mortgage rate. Know when you can take advantage of prepayment privileges.

2. Make lump-sum payments. Apply “found” money like bonuses, cash gifts, pay raises and tax refunds to your mortgage.

3. Shop around for your mortgage. Don’t automatically sign your mortgage renewal papers without shopping around. Start looking four to six months ahead of when your mortgage term ends.