Dream Bigger: Boosting Savings & Paying Off Your Mortgage Faster

Neil Joseph: "Hey Jerome, have you noticed how, in our line of work, the topic of saving money seems to come up more often these days? Especially with the way things are going, people are really starting to think about how they can stretch their dollars."

Jerome Christensen: "Undeniably, Neil. It’s like everyone’s waking up to the fact that saving isn’t just about putting money in the bank; it’s about being smart with how you manage your finances throughout the year. It’s interesting to see how some simple changes can really make a difference, especially in a place like Canada where the seasons can play a big role in your expenses."

Neil Joseph: "Yeah, exactly. And I think it’s worth sharing some of the strategies we’ve seen work for others. You know, those little adjustments that people have made—like tweaking their thermostat settings in the winter or setting aside a bit of their paycheck before they even see it. These aren’t groundbreaking ideas, but they’ve helped people get ahead in ways they didn’t expect."

Jerome Christensen: "So true Neil. And speaking of which, there’s also some great tools out there that can make saving easier, especially for first-time homebuyers. I’m thinking of things like the Tax-Free Savings Account and the First Home Savings Account. These aren’t just your typical savings accounts; they’ve got real advantages that can help people grow their savings faster."

Neil Joseph: "So let’s break it down a bit. I remember talking to a client who decided to review all their monthly subscriptions—streaming services, gym memberships, those little things that add up. They realized they were paying for stuff they barely used. After canceling a few subscriptions, they found themselves with an extra few hundred dollars each year. It wasn’t a huge change, but over time, it made a real impact on their savings."

Jerome Christensen: "It’s those small changes that can really add up. Another one I’ve seen is people who make sure to ‘pay themselves first.’ I know it sounds basic, but it’s one of the oldest tricks in the book for a reason. Setting aside a portion of your paycheck before you do anything else can really help build that savings cushion without too much effort."

Neil Joseph: "Exactly. And when we talk about tools like the TFSA or the First Home Savings Account, it’s about giving people the means to maximize their savings. I had a client who didn’t realize that the TFSA isn’t just a cash account—it can hold investments like Stocks, bonds and Mutual Funds too. That lightbulb moment for them was huge. Suddenly, they were thinking long-term, about growing their money, not just stashing it away."

Jerome Christensen: "That’s a great point. And with the First Home Savings Account, I’ve seen a lot of first-time buyers who didn’t even know it existed. Once they understood the tax benefits against their income, they were all in. Also, if you use only a portion of the amount when you do buy a home, the rest can be transferred to an RRSP. It’s about making sure people know what’s out there and how it can work for them."

Neil Joseph: "And it’s not just about these big tools, right? Even simple things like buying energy-efficient appliances or using a clothes line in the summer to cutting back on subscriptions you don’t use—those small adjustments can free up cash that goes right into savings."

Jerome Christensen: "Exactly. And let’s not forget another strategy that doesn’t get talked about enough, adjusting your tax withholdings at the source. A lot of people don’t realize they can reduce the amount of taxes taken off their paycheck by contributing directly to an RRSP. Not only does this save on the amount t of taxes you pay, it ensures that your savings are earning interest sooner which can equate to thousands of dollars over time and it also helps you build your retirement savings at a much faster pace."

Neil Joseph: "Yeah, that’s a great point. If you’re getting a big tax refund every year, that’s money you could have been earning interest on in an RRSP instead of letting the government hold onto it. By lowering your taxes at the source, you’re essentially paying yourself first in a whole new way—plus, you may reduce your overall tax burden. It’s a win-win."

Jerome Christensen: "And the best part is, you’re putting that money to work for you right away. It’s not sitting around waiting for tax season—you’re already ahead of the game by the time your tax return rolls around. These are the kinds of strategies that can really help people maximize their savings and take control of their finances."

Neil Joseph: "Exactly. And when you start stacking these strategies—using a programmable thermostat, paying yourself first, adjusting your tax withholdings, and leveraging those savings accounts—you’re really setting yourself up for success. It’s about being proactive and finding every opportunity to put more money in your own pocket, rather than someone else’s."

Neil Joseph: "So, for anyone listening, maybe the takeaway here is to start with what you can control. Look at your thermostat settings, check out those registered savings accounts, and maybe take a second glance at where your money’s going each month. And if you’re not adjusting your tax withholdings to benefit your savings, now might be a good time to look into that too."

Jerome Christensen: "And it’s never too late to start. Whether you’re looking to save for a home, or just want to make sure you’re getting the most out of your income, there are plenty of strategies out there. And hey, if you’re feeling stuck, Neil and I are always here to help you figure out the best path forward."

Topic - Paying Off Your Mortgage Early

JEROME: Hello everyone, welcome back to the second half of the episode of *"Getting Your Sh*t Together!"* How’s it going, Neil?

NEIL: I’m doing great, Jerome! Super Pumped for today’s topic because we’re diving into something that’s a lot of people might be worrying about —how to pay off what’s mostly like... a very huge mortgage and how to be mortgage-free before retirement.

JEROME: Absolutely. Being mortgage-free is a huge financial milestone and can be a big relief, but for many, it might seem like an impossible dream. But here's the thing—it’s not just a lofty aspiration; it’s entirely within reach. Let’s break it down for our audience and show them how, with the right strategies, achieving mortgage freedom is not just possible—it’s absolutely doable.

NEIL: That’s right. Whether you’re someone who’s just started your mortgage journey or you’ve been chipping away at it for years, we’ve got some actionable tips to help you accelerate that payoff and reach mortgage freedom sooner.

JEROME: Let’s kick things off with one of the most straightforward strategies—something that a lot of homeowners overlook—**increasing your frequency payments**. Neil, what’s your take on this?

NEIL: It’s a simple yet powerful strategy, Jerome. Think about it: if you can squeeze even an extra $100 or $200 into your monthly payment, you’re not just paying down principal—you’re cutting down the interest that would have been paid on that amount for months and years to come. It creates a snowball effect which can shave years off your mortgage. For example, suppose you have a $500,000 mortgage at 5% for 25-years. Just increasing the monthly payment by $100 once, eliminates 18 months of payment and effectively reduces the interest rate on the mortgage to 4.34% (instead of 5%). That’s net Interest costs savings of over $26,000. Imagine if you can increase your monthly payment by $100 each year or even a couple of times! Better yet, calculate and find out. The results will motivate you!

However, there is a word of Caution: Be 100% sure that you can sustain the higher monthly payment as most lenders will not allow the payments to be reduced back to the original amount during the remainder of the existing term. If you’re not sure, take baby steps.. increase in small increments and get comfortable before increasing further.

JEROME: Exactly. And for those who might find it hard to consistently increase their payments, another great approach is to switch to biweekly accelerated payments instead of monthly ones. Neil, want to break down how that works?

NEIL: Sure thing. Instead of making one payment per month, pay more often and slightly higher (about 8% higher) by switching to “Bi-Weekly Accelerated” mode of payments. It might sound like a small change, but here’s the kicker—you end up making the equivalent of 13 monthly payments in a year instead of the regular 12. That extra payment goes straight towards your principal, helping you pay off the loan faster and save on interest. Imagine the same $500,000 mortgage at 5% for 25-years... applying this strategy will shave off about 42 months of payment or over $59,000 in interest costs effectively bringing down the actual interest rate to 4.24% from 5%. Tell me that’s not worth the 5 minutes it took you to listen to us? Isn’t that cool?

JEROME: That is amazing indeed. It’s like sneaking in an extra payment without really feeling the pinch. Undoubtedly, this is a method that can have a significant benefit of savings on interest over the life of the mortgage. Here’s another strategy that might be timely as we enter this coming rate reduction cycle: **refinancing to a shorter term**. Now, this isn’t for everyone, but if you can handle higher monthly payments, then shortening your amortization or repayment period can save you a Metric ton in interest costs as well.

NEIL: Right. It’s a balancing act. Your monthly payments remain high or maybe they go up, but you’re out of debt a lot sooner, and the interest savings can be substantial. Plus, if interest rates have dropped since you got the current mortgage, refinancing could be a win-win.

JEROME: And for those who occasionally come into extra cash—a bonus at work, a tax refund, an inheritance or maybe even a lottery —you can use that windfall to **make a lump sum payment**. Neil, how impactful can that be?

NEIL: Tremendously impactful, Jerome. Lump sum payments go directly towards your principal, meaning you’re cutting down the amount of debt you’re paying interest on. Even just one or two of these payments over the life of your mortgage can make a significant difference. For example, let’s go back to the same $500,000 mortgage at 5% for 25-years. If one makes a lumpsum payment of $50,000, they will shave off 52 months of payment, I will say again.. 52 months of payment: Thats almost 4 and a half years of payments That’s a saving of over $100,000 of interest costs or effectively reduce your interest rate to 3.12%. Isn’t that out of the world??

Jerome : This is crazy information Neil. I’m glad we’re here to share these “secrets” with everyone. Here’s another strategy that’s a bit more advanced but incredibly powerful—the Smith Manoeuvre. This is a mortgage conversion strategy that allows homeowners to pay down their mortgage faster and build an investment portfolio at the same time. Neil, can you elaborate on this one?

Neil: Definitely, Jerome. One of the nuances with the Canadian tax system is homeowners are not able to claim tax deduction for any interest costs that Canadians pay for their primary home. They only get the benefit of not having to pay Capital Gains on sale of their primary home. At least we enjoy that benefit . . . for now. While there have been rumours of the Liberal government tinkering with it, no announcements have been made to date. Sorry for digressing . . let me come back to topic. As I was saying, Canadians do not enjoy a tax deduction on interest costs on their primary home. This is where the Smith Manoeuvre can be a game changer. This is a conversion strategy which replaces the mortgage on your home with an investment loan. The strategy not only accelerates mortgage REpayment but also lets you invest in assets like stocks, bonds, or even real estate. The beauty of this strategy is that it can also generate meaningful tax refunds each year, which you can then use to further reduce your mortgage balance. In essence, the nature of the debt changes but you will still have a debt obligation on your home (though it transfers to a Good Debt if implemented properly).

Jerome: So, It’s like hitting two birds with one stone—paying down your mortgage and building wealth simultaneously. If you’re serious about becoming mortgage-free while still growing your investments, the Smith Manoeuvre is worth exploring.

NEIL: And that brings us to **cutting expenses** and **redirecting savings** towards your mortgage. It’s all about prioritizing your financial goals. What can folks do here, Jerome?

JEROME: Look at your budget—there’s always something you can trim. Whether it’s eating out less, canceling that gym membership you never use, subscriptions that you have forgotten about, or shopping smarter, every dollar counts. And when you redirect those savings into your mortgage, you’re essentially investing in your future freedom.

NEIL: Exactly. And for those willing to make a more drastic change, **downsizing** might be worth considering. Maybe you are an empty nester or your current home is more than you need, if so.. selling and moving to a smaller place can free up a big chunk of cash to pay off your mortgage faster and also reducing ongoing monthly expenses.

JEROME: It’s a big decision, but for some, it’s the right one. And let’s not forget about **generating additional income**—whether it’s picking up a side hustle, freelancing, or renting out part of your home, that extra cash flow can really speed up the process.

NEIL: All these strategies boil down to one thing—being intentional about your money. And if you’re serious about paying off your mortgage early, it might be worth **consulting with a financial advisor** to develop a tailored plan.

Jerome: A good advisor can help you maximize your resources and set you on the path to mortgage freedom. So, Neil, any final thoughts before we wrap up?

Neil: Jerome, I’ve been thinking a lot about that Lotto Max ad—you know, the one where the Dream Coach keeps telling the viewers to Dream Bigger? It’s a powerful message, and I think it really ties into what we’ve been talking about today.

Jerome: Absolutely, Neil. The idea of dreaming bigger isn’t just about winning the lottery—it’s about pushing the boundaries of what we think is possible in our own lives.

Neil: Exactly. So, if you’re listening and thinking, “I just want to be mortgage-free, but it feels out of reach,” we’re here to tell you—Dream Bigger. You’re not just working towards paying off your mortgage. You’re working towards financial freedom, peace of mind, and the ability to invest in the life you truly want.

Jerome: Right. Maybe it’s that dream vacation home, starting your own business, or retiring earlier than you thought possible. Whatever your dream is, don’t be afraid to reach for it. With the right strategies and a little persistence, you can turn that dream into reality.

Neil: So, take that Lotto Max advice to heart. Push yourself to think beyond what seems possible today. Dream bigger, act smarter, and watch as you turn those dreams into your everyday life.

Jerome: And remember, we’re here to help you every step of the way. So keep dreaming big!

Neil: That’s a wrap for today, folks! Thanks for joining us, and. we’ll catch you next time on "Getting Your Sh*t Together."