Mortgage Prepayment Calculator

See how extra payments can save you thousands in interest and shorten your mortgage

💡 Why Make Prepayments?

Making extra payments toward your mortgage principal can significantly reduce the total interest you pay and help you become mortgage-free faster. Even small additional payments can make a big difference over time.

Mortgage Information

Prepayment Options

Extra amount added to each regular payment

Your Prepayment Results

Without Prepayments

Monthly Payment $0
Total Interest Paid $0
Total Amount Paid $0
Mortgage-Free Date -

With Prepayments Better

Payment (with extra) $0
Total Interest Paid $0
Total Amount Paid $0
Mortgage-Free Date -

💰 Your Total Savings

$0

Interest saved with prepayments

Mortgage paid off 0 years faster

Savings Breakdown

💵
$0
Interest Saved
⏱️
0
Years Saved
📅
0
Months Saved
🎯
$0
Total Prepaid

📊 ROI on Your Prepayments

For every dollar you prepay, you save approximately $0.00 in interest charges. This represents a guaranteed return equivalent to your mortgage interest rate.

Understanding Mortgage Prepayments

What Are Mortgage Prepayments?

Mortgage prepayments are additional payments you make toward your mortgage principal, beyond your regular scheduled payments. These extra payments directly reduce the amount you owe, which decreases the interest charged and can significantly shorten your amortization period.

Types of Prepayments

Regular Extra Payments

Add a fixed amount to each regular payment. Even $50-$200 extra per payment can save thousands over the life of your mortgage.

Lump Sum Payments

Make one-time larger payments, typically from bonuses, tax refunds, or windfalls. Most lenders allow 10-20% of the original principal per year.

Increased Payment Amount

Permanently increase your regular payment amount, up to a certain percentage (often 15-20%) of the original payment.

Accelerated Payments

Switch from monthly to accelerated bi-weekly or weekly payments, making the equivalent of one extra monthly payment per year.

Prepayment Privileges in Canada

Most Canadian mortgages allow prepayments within certain limits:

  • Annual Lump Sum: Typically 10-20% of the original principal per year without penalty
  • Payment Increase: Usually 10-20% increase in regular payment amount per year
  • Double-Up Payments: Some lenders allow you to double any payment
  • Skip-a-Payment: Some mortgages allow skipping payments (though this costs you more interest)

⚠️ Check Your Mortgage Terms

Always review your specific mortgage agreement for prepayment terms. Closed mortgages have prepayment limits, while open mortgages allow unlimited prepayments but typically have higher interest rates.

When Should You Make Prepayments?

✅ Good Times to Prepay

  • After receiving a bonus, tax refund, or inheritance
  • When you have extra cash flow and high-interest debts are paid off
  • Early in your mortgage term (maximum impact)
  • When mortgage rates are higher than investment returns
  • If you're approaching retirement and want to be mortgage-free

⚖️ Consider Alternatives Before Prepaying

  • High-Interest Debt: Pay off credit cards (20%+) before prepaying a 5% mortgage
  • Emergency Fund: Ensure you have 3-6 months of expenses saved first
  • RRSP/TFSA: Consider maxing out tax-advantaged accounts, especially with employer matching
  • Investment Opportunities: If you can reliably earn more than your mortgage rate

The Power of Starting Early

Prepayments have the greatest impact early in your mortgage when most of your payment goes toward interest. A $1,000 lump sum in year 1 saves much more interest than the same payment in year 20.

Tax Considerations

Remember that mortgage prepayments are made with after-tax dollars and mortgage interest on your principal residence is not tax-deductible in Canada. However, if you have a rental property or home office, a portion of your mortgage interest may be deductible.

Want to Explore Other Mortgage Scenarios?

Check out our other calculators to plan your complete mortgage strategy.

Payment Calculator

Frequently Asked Questions

How much can I save with mortgage prepayments in Canada? +
The savings from prepayments depend on your mortgage balance, interest rate, and how early you make them. As a general example, adding $200/month to a $400,000 mortgage at 5.5% over 25 years can save over $40,000 in interest and cut nearly 4 years off your amortization. The earlier in your mortgage term you prepay, the greater the impact because more of your regular payment is going toward interest.
What are the prepayment privileges on a Canadian mortgage? +
Most Canadian closed mortgages allow annual prepayments of 10–20% of the original principal without penalty, and payment increases of 10–20% per year. Some lenders also offer double-up payment options. These limits reset every year on the anniversary of your mortgage. Always check your specific mortgage agreement — exceeding the limit triggers a prepayment penalty, which can be substantial.
What is the difference between accelerated bi-weekly and regular bi-weekly payments? +
Regular bi-weekly payments divide your monthly payment by two and pay it every two weeks — 26 payments per year, equivalent to 12 monthly payments. Accelerated bi-weekly takes your monthly payment and divides it by two, also paid every two weeks — but because there are 26 bi-weekly periods per year, you effectively make 13 monthly payments annually. That one extra monthly payment per year can shave years off your amortization.
Should I make prepayments or invest the money instead? +
This depends on your mortgage rate versus your expected investment return. If your mortgage rate is 5.5%, prepaying gives you a guaranteed 5.5% return (the interest you avoid). If you can reliably earn more than 5.5% after tax in investments, investing may be better. However, prioritize paying off high-interest debt (credit cards) first, then ensure you have a 3–6 month emergency fund, then consider maxing RRSP/TFSA before prepaying a low-rate mortgage.
When is the best time to make a lump sum prepayment? +
The earlier in your mortgage the better — prepayments in Year 1 save significantly more interest than the same amount in Year 15, because you are reducing the principal that accrues interest for the remaining life of the mortgage. Common sources for lump sum prepayments include tax refunds, year-end bonuses, inheritances, and proceeds from selling assets. Most lenders allow lump sum prepayments on the anniversary date of your mortgage.
Is mortgage interest tax deductible in Canada? +
No — mortgage interest on your principal residence is not tax deductible in Canada, unlike in the United States. This makes prepaying your mortgage more financially attractive than it would be in the US, since you receive no tax benefit from carrying the debt. However, if you have a rental property or use a portion of your home exclusively for business, that portion of your mortgage interest may be deductible.