Mortgage prepayment calculator
A little extra each payment or a yearly lump sum goes straight to principal. See the interest you save and how many years sooner you’re mortgage-free.
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Why prepayments are so powerful
Every dollar you prepay stops earning interest for the lender for the rest of the amortization. Early in a mortgage, most of each payment is interest, so a prepayment in year one saves far more than the same amount in year twenty.
Prepayment privileges
Closed mortgages limit how much you can prepay without a penalty. Typical privileges are:
- A lump sum of 10% to 20% of the original balance once a year (often on any payment date).
- Raising your regular payment by 10% to 20% once a year.
- “Double-up” payments on some products.
Open mortgages allow unlimited prepayments but carry a higher rate. Unused privileges usually don’t carry forward.
Prepay or invest?
Paying down a 4.5% mortgage is a guaranteed, tax-free 4.5% return. Compare that with what you would earn after tax in an RRSP, TFSA or FHSA. Many households do both: maximize tax-sheltered accounts first, then prepay.
Frequently asked questions
Is it better to make extra payments or a lump sum?
The sooner the money goes in, the more it saves. Extra amounts on each payment start working immediately; a lump sum at year end saves slightly less per dollar but is easier for bonuses and tax refunds.
Does switching to accelerated biweekly count as prepaying?
Yes, effectively. It adds one monthly payment a year. Use the payment frequency calculator to compare.
Will prepaying lower my payment?
Usually not; it shortens the amortization. Some lenders let you re-amortize to lower the payment, or you can choose a lower payment at renewal.
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