Mortgage Prepayment Calculator

Every dollar you prepay goes straight against your principal — so you stop paying interest on that amount for the rest of your amortization. Early in your mortgage, when most of each payment is interest, prepayments are especially powerful. A prepayment in year two of a 25-year term saves far more total interest than the same dollar amount applied in year twenty, because it has two decades of compounding interest to cancel out.

Canadian mortgages typically let you prepay 10–20% of the original principal per year as a lump sum, plus increase your regular payment by 10–20%, all penalty-free. Using these privileges is one of the safest guaranteed returns available — a payment against a 4.5% mortgage is effectively a risk-free, tax-free 4.5% return, something no GIC or savings account currently matches after tax.

A worked example

Take a $400,000 mortgage at 4.5% over a 25-year amortization. The regular payment is roughly $2,217 a month, and over the full amortization you'd pay about $265,000 in interest. Add a $200 monthly prepayment and you cut the amortization by roughly four years and save tens of thousands in interest — without ever feeling a large hit to your budget. Layer a single $10,000 lump sum on top, applied early, and the savings grow again. Enter your own numbers above to see your exact result.

Three ways to prepay, ranked by ease

1. Switch to accelerated bi-weekly payments. This is the easiest win and costs almost nothing day to day: you make the equivalent of one extra monthly payment per year, often cutting three to four years off a 25-year amortization. 2. Raise your regular payment. Most lenders let you increase it by 10–20% at any time; even a modest bump compounds steadily. 3. Make annual lump sums. Use bonuses, tax refunds, or savings, staying within your annual privilege limit.

When prepaying may not be the best move

Prepaying isn't always the optimal choice. If you carry higher-interest debt — credit cards, an unsecured line of credit, or a car loan — clearing that first almost always beats prepaying a lower-rate mortgage. The same logic applies to building an emergency fund: a prepayment cannot be withdrawn if you lose income, so keep three to six months of expenses accessible before you accelerate. And if you have unused RRSP or TFSA room and your mortgage rate is low, investing may build more long-term wealth. The right answer depends on your rate, your other debts, and how much you value guaranteed savings over flexibility.