Model a lump sum, a payment increase, or accelerated bi-weekly — and check it against your lender's penalty-free allowance before you send the money.
Enter your mortgage, then add a lump sum, a payment increase, or switch to accelerated bi-weekly. All figures in Canadian dollars, semi-annual compounding (the Canadian standard).
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Interest without prepayments
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Estimates only, semi-annual compounding. Confirm privileges in your mortgage commitment before sending funds.
Every prepayment strategy in Canada reduces to three tools. They stack, and the calculator above lets you run them together.
A one-time payment applied 100% to principal. Highest impact per dollar because it removes principal before any interest accrues on it. Capped annually as a percentage of your original principal — not your current balance.
Raising your regular payment by the percentage your lender allows. The entire increase goes to principal. Less dramatic per event, but it compounds every single payment with no cash-flow surprise.
The most misunderstood option in Canadian mortgages. Accelerated bi-weekly means paying half your monthly payment every two weeks. There are 26 bi-weekly periods but only 24 half-months in a year, so you make one extra full monthly payment annually without noticing. Plain "bi-weekly" simply splits the annual monthly total across 26 payments and saves you almost nothing — confirm with your lender which one you are on.
Privileges vary by lender and by product — no-frills and rate-special mortgages are stricter than full-feature ones. These are the standard full-feature limits, verified against the lenders' own published prepayment pages:
The RBC gotcha: RBC allows the 10% lump sum once in every rolling 12-month period — not per calendar year and not "any time you like." After one lump sum you wait a full 12 months for the next. RBC compensates with the most flexible double-up in the market. Always confirm your own limits in your mortgage commitment; the number in the contract governs, not the marketing page.
Base payment on a $500,000 mortgage, 25-year amortization, 4.19% with semi-annual compounding is about $2,680/month. Here is what each lever does, using the same engine as the calculator above:
Figures are illustrative and rounded — run your own balance, rate, and amortization in the calculator for your actual numbers. The pattern holds at any rate: lump sums do the heavy lifting when you have cash, accelerated bi-weekly is the best zero-effort option when you don't.
Prepayment is a guaranteed, tax-free return equal to your mortgage rate. That is genuinely good — but it is not always the best available use of the dollar. Skip or delay prepayment when:
Two more traps worth naming: never break a mortgage mid-term just to pay it down (the IRD penalty on a five-year fixed usually swallows the savings), and never prepay a HELOC ahead of the first mortgage — HELOC principal can be re-borrowed, first-mortgage principal cannot.
Canadian fixed-rate mortgages compound semi-annually, not in advance — a legal requirement under the Interest Act, and the reason a US amortization calculator gives you the wrong answer here. This tool converts your annual rate to an effective semi-annual rate, then to a true periodic rate for monthly or bi-weekly payments, and amortizes payment by payment. Lump sums are applied at each 12-payment anniversary; payment increases are applied to every payment from the start. The baseline comparison is always a plain monthly schedule with no prepayments, so "interest saved" reflects the full effect of everything you toggled on.
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Commonly 10–20% of the original principal per year as a lump sum, plus a separate allowance to raise your regular payment by 10–100%. RBC and National Bank sit at 10%, TD and Scotiabank at 15%, Manulife at 20% on the fixed portion. Your mortgage commitment is the governing document — check it before sending funds.
By default a prepayment shortens the amortization and leaves your payment unchanged, which is what produces the interest savings. Some lenders will recalculate to a lower payment on request, but that keeps the amortization and gives up most of the benefit.
Not within your annual privilege — those prepayments are penalty-free. Exceeding the cap is treated as a partial breakage and is charged the greater of three months' interest or the Interest Rate Differential on the excess amount.
It saves real money — roughly three years off a 25-year amortization at current rates. The mechanism is not payment frequency; it is that half your monthly payment 26 times a year equals 13 monthly payments instead of 12. Non-accelerated bi-weekly does not do this and saves almost nothing.
Prepayment returns exactly your mortgage rate, guaranteed and tax-free. Fill high-interest debt, an employer RRSP match, FHSA room, and RRSP room in a high marginal bracket first — those beat a mid-4% rate on after-tax math. Once registered room is full, prepayment is a strong, risk-free choice.
As early in your privilege year as your cash flow allows, because interest accrues daily. The single best moment overall is the renewal date itself — at renewal there is no penalty and no cap, so any amount can go to principal before the new term starts.
Shortening from 25 to 20 years at renewal locks in faster paydown but also locks in the higher payment for the whole term. Keeping the longer amortization and using prepayment privileges reaches the same place with the option to stop if income changes.
On a variable rate it is almost always three months' interest. On a fixed rate it is the greater of three months' interest or the Interest Rate Differential, which can run into five figures. Get both numbers in writing before triggering a full payout, and consider waiting for renewal if it is close.
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