Paying down your mortgage faster. It's one of those boilerplate suggestions that financial advisers love to make to their clients. After all, throwing extra money at the biggest debt most Canadians have can result in big interest savings and being mortgage-free years sooner.
So why isn't everyone doing that?
According to a spring analysis by the chief economist at the Canadian Association of Accredited Mortgage Professionals, only 35 per cent of Canadians with mortgages took some kind of action in the past year to speed up the date of their "burn the mortgage" party. That suggests that almost two-thirds of those mortgage holders paid off their mortgages as the contract dictated, at least over the previous year.
A recent survey (carried out on May 21-22) commissioned by CIBC and carried out by Angus Reid found that only 55 per cent of the 1,509 online respondents with mortgages had taken some kind of action to repay their mortgages faster since they'd originally bought their homes.
Since mortgage payments are made with after-tax dollars, putting extra money down on a debt with an interest rate of 3.49% is equivalent to getting a guaranteed, risk-free return of over five per cent. If your mortgage rate is higher, so would the return be.
So why the seeming reluctance by many to do this?
Mortgage experts say personal circumstances are often at the top of the "why not" list.
"Young families or first-time buyers are in an expensive period of life and are unlikely to have much free cash to put towards their mortgage," points out Jason Scott, a mortgage associate with TMG The Mortgage Group in Edmonton and author of Approved! Mortgage Advice for all Stages of Life.
Others, he says, may be sensibly tackling other debts first. "If they have more expensive debt, like credit cards, it's better if they pay off the more expensive debt first," Scott told CBC News.
Industry players say it's also true that, in these days of lower mortgage rates, it may be a tougher sell to persuade consumers that it's worth tackling mortgage debt at all.
You also won't have to dig too deeply to find people who tell you that, regardless of today's lower rates, they just don't have the extra money to tackle their mortgage debt.
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CBC News Posted: Jul 28, 2014 5:00 AM ET