Mortgage Freedom on the Horizon for Some Canadians: Scotiabank Study – Ask a Vancouver Mortgage Broker
Scotiabank Offers Advice on How to Become Mortgage-Free Faster
TORONTO, ON–(Marketwired – April 01, 2014) – The dream of mortgage freedom is less than 10 years away for 37% of Canadian mortgage holders, according to Scotiabank’s Mortgage Landscape Study. More than two-thirds (68%) of mortgage holders have taken steps to pay off their mortgage faster, including increasing the frequency of regular payments (39%), increasing regular payment amounts (25%), and making additional lump sum payments (24%).
Of mortgage holders who agree that being mortgage-free faster is important (80%), the top cited reasons are to have more disposable income (30%), to pay off debt or to pay less interest (both 17%), and to save for retirement (11%).
- Just over one-half of mortgage holders (54%) said they are able to make additional mortgage payments, with 34% of those making payments whenever they can afford it, 19% making additional payments annually and 27% semi-annually or more frequent payments.
- Among the 38% of mortgage holders who say they are not able to make additional payments over and above their regular payments, indicate that affordability (64%) and competing priorities (54%) are key challenges to mortgage freedom.
- 16% of mortgage holders indicated that they cannot afford any increase in their current payments.
“For many, the mortgage is their single biggest debt and it may seem overwhelming,” says David Stafford, Managing Director of Real Estate Secured Lending at Scotiabank. “It’s important for mortgage holders to know that small changes can make a big difference in the total cost of borrowing over the life of the mortgage. While periodic lump sums and even switching to bi-weekly payments are great options, increasing your payments by small amounts, like an extra $20 payment per month, can make a big difference without impacting your lifestyle.”
Four ways to become mortgage-free faster:
In addition to the steps below, current mortgage holders can test the Mortgage-Free Faster Calculator to help identify small changes they can make towards paying off their mortgages faster and build savings for other things like travel, education or retirement.
- Switch from monthly to weekly or bi-weekly payments. By increasing the frequency of payments, you will make one extra monthly payment per year, which is directed to reducing the principal balance of your mortgage. The faster you pay off your mortgage, the more money you’ll save in interest costs and you will be mortgage free years ahead of schedule.
- Increase your payments. Increasing your mortgage payments by small amounts every year, even by 2%, can help you pay off your mortgage sooner and may have a big impact on what you pay in interest over the long term.
- Make lump-sum payments. Take advantage of your pre-payment option and use your tax refund or annual bonus to make lump-sum payments. Choose to pre-pay up to 15% of the original principal amount of your mortgage any time during each year of the term.
- Diversify your mortgage by mixing short and long term mortgages and/or fixed and variable rates. Base your total mortgage payment on what it would be based on the highest rate of all the mortgage components. You get the advantage of lower interest rates on some portion of your mortgage, while paying it off sooner at the same time.
About the polling data
For this survey, TNS Canada conducted online interviews among 500 mortgage holders and 260 mortgage intenders aged 21 years or older. Mortgage holders were defined as property owners with a mortgage (either on primary or secondary residence or income property), who are not intending to get a new mortgage in next 12 months. Mortgage intenders were defined as consumers in the market for a mortgage in the next 12 months. In tabulation, data was weighted to be reflective of the distribution of mortgage holders and intenders by region, gender, and age, using a combination of results from Statistics Canada and from the 2012 Scotiabank ‘Mega Poll’. The survey was conducted between December 19 and 30, 2013.
Scotiabank is a leading financial services provider in over 55 countries and Canada’s most international bank. Through our team of more than 83,000 employees, Scotiabank and its affiliates offer a broad range of products and services, including personal and commercial banking, wealth management, corporate and investment banking to over 21 million customers. With assets of $783 billion (as at January 31, 2014), Scotiabank trades on the Toronto (TSX: BNS) and New York Exchanges (NYSE: BNS). Scotiabank distributes the Bank’s media releases using Marketwired. For more information please visit www.scotiabank.com.
Time Horizon to be Mortgage Free
|Less than 1 year||2%||1%||1%||3%||2%|
|1 to 3 years||6%||2%||5%||6%||6%|
|4 to 5 years||7%||6%||7%||5%||9%|
|6 to 10 years||22%||32%||21%||22%||19%|
|11 to 20 years||39%||33%||41%||42%||36%|
|21 years or more||24%||26%||25%||21%||28%|
Top reasons to be mortgage free faster
|Have more disposable income||30%||34%||24%||33%||31%|
|To get rid of debt/debt free||17%||9%||22%||13%||19%|
|Can pay less/low interest||17%||7%||33%||9%||19%|
|Able to save for retirement||11%||22%||2%||13%||12%|
|Save money/more money||10%||3%||7%||14%||9%|
Ability to make additional mortgage payments
Steps taken to pay off mortgage sooner
(in additional to regular payments)
|Increased frequency of regular payments||39%||43%||44%||36%||37%|
|Increased amount of regular payments||25%||13%||26%||27%||24%|
|Made additional lump sum payment(s)||24%||25%||18%||23%||30%|
|Renegotiated for a lower mortgage rate||19%||12%||16%||21%||20%|
|None of the above||32%||39%||23%||34%||36%|
Reasons for not making additional mortgage payments
|Do not have enough money to do so||64%||42%||50%||72%||67%|
|Have other debts to pay off first||42%||46%||27%||40%||50%|
|Need the money for other priorities||27%||23%||43%||21%||27%|
|Current payment is manageable||18%||13%||39%||18%||9%|
|Haven’t had the mortgage very long||16%||10%||29%||7%||21%|
|Never thought about it before||6%||22%||8%||4%||4%|