How to Make a Lump Sum Payment on Your TD Mortgage

Paying down your mortgage faster with a lump sum payment can help you save thousands of dollars in interest and shorten your amortization period. Whether you’ve come into some extra cash from a tax refund, inheritance, or bonus at work, putting those funds towards your mortgage principal is a smart financial move. Here’s a step-by-step guide to making lump sum payments on a TD mortgage and how to take advantage of this money-saving strategy.

Making extra lump sum payments is one of the fastest ways to pay off your mortgage early. Even relatively small lump sum payments can make a big difference over the lifetime of your mortgage. Say you have a $300,000 mortgage at 3% interest over 25 years. By making a $10,000 lump sum payment in the first year, you would save nearly $30,000 in interest and shorten your mortgage by 3 years!

How Lump Sum Payments Work

When you make a mortgage payment as usual, most of it goes towards paying interest while only a small portion reduces your principal balance. With a lump sum payment, the entire amount goes straight to your principal. This reduces your overall interest costs because you have a lower principal balance accruing interest each month.

Lump sum payments also shorten your amortization schedule – the time until your mortgage is paid off. Each month, the portion of your payment applied to the principal gets a little bigger as the interest portion gets smaller. A lump sum payment gives you a head start by immediately lowering your principal.

When To Make a Lump Sum Payment

The best time to make a lump sum payment is right after your monthly payment. This way, you get the benefit of one full month’s interest savings on the lower principal balance. Some other ideal times include:

• Right after an annual review when your lender recalculates your amortization schedule
• When you renew or refinance your mortgage
• Early in your mortgage term to maximize interest savings
• Near the end of your mortgage when you’re close to paying it off

How Much Should You Pay?

When deciding on a lump sum amount, consider:

• Your budget – Don’t overextend your finances. Aim for an amount you can afford without impacting your emergency fund or other financial goals.
• Mortgage balance – The higher your principal, the more impact even small lump sums can have. Target at least 1-2% of your overall mortgage balance if possible.
• Interest savings – Use an online calculator to estimate your interest cost savings from different lump sum amounts. Find the sweet spot for maximum savings.
• Future plans – If you may move soon, large lump sums early on won’t have time to accumulate interest savings. Smaller, periodic lump sums could work better in that case.

Making the Payment with TD

Contact TD to confirm the lump sum process and any fees involved. Here are the general steps:

Online or Mobile App

1. Log in to EasyWeb or your TD app.
2. Go to Pay Bills and select your TD mortgage account.
3. Enter the lump sum amount in the Other Amount field.
4. Enter your account number and submit the payment.

In Person

1. Visit any TD Canada Trust branch.
2. Let the teller know you want to make a lump sum payment on your mortgage.
3. Provide your mortgage account details and the lump sum amount.
4. Make the payment by cash, cheque, or debit.

By Mail

1. Write a cheque for the lump sum amount payable to TD Mortgage Corporation.
2. Mail it to P.O. Box 5155, Mississauga, ON, L5A 3M4.
3. Include a note identifying your mortgage account and indicating it is a lump sum payment.

Be sure to keep proof of your lump sum payment on file, whether it’s a receipt from the teller or confirmation from your online banking.

Tracking Your Progress

After making a lump sum payment, check your next 1-2 statements to ensure it was applied properly to your principal. Going forward, monitor your principal balance and interest costs to see your mortgage paydown accelerating.

You can also request an updated amortization schedule from TD annually. This will reflect your new payoff timeframe based on lump sum payments made over the past year.

Stay motivated to keep making lump sum payments by calculating the money you are saving in interest with every extra dollar you pay down!

Other Ways to Pay Off Your Mortgage Faster

Along with lump sum payments, here are a few other strategies to shorten your mortgage term:

• Make bi-weekly or weekly payments instead of monthly to increase payment frequency
• Increase your payment amount by adding a little extra each month
• Shorten your amortization period when you renew your mortgage
• Switch to an accelerated bi-weekly payment program through your lender

The key is paying more than your scheduled mortgage payment as often as possible. Automate these extra payments to make the process easy and consistent.

Conclusion

Making lump sum payments can significantly speed up your journey to mortgage freedom. Use this guide to plan and execute lump sum payments on a TD mortgage properly. Be strategic about when and how much to pay based on your financial situation. Stay disciplined once you start – the substantial interest savings you’ll reap make it well worth the effort.

Calculate Your Dream Home’s Monthly Payments with Our New TD Mortgage Calculator.

William Lyon