Most Canadian mortgages let you pay down more than the regular payment each year without a penalty. Used even modestly, these prepayment privileges can take years off the amortization. This lesson looks at the three main ways to do it and what each changes.
Why extra payments work so well
Every extra dollar goes straight to principal. Less principal means less interest next month, and the month after, for the rest of the mortgage. That's the same snowball that makes the early years mostly interest, working in your favour instead.
Three ways to prepay
Raising the regular payment. Many lenders let you increase your payment by a set percentage, often 10% to 20%, once a year.
Lump sums. Most closed mortgages allow a lump-sum payment each year, often 10% to 20% of the original amount. Some lenders accept it any time; others only on the anniversary date.
Accelerated payments. With accelerated biweekly payments, you pay half of the monthly payment every two weeks. Because there are 26 two-week periods in a year, that adds up to the equivalent of 13 monthly payments instead of 12. Plain biweekly payments, by contrast, are set so the yearly total is the same as monthly and change almost nothing.
A worked example
Take the mortgage from the first lesson: $400,000 at 4.25% over 25 years, about $2,159 a month. Each option below is estimated on its own, assuming the rate holds for the whole period.
| Change | Paid off sooner by | Interest saved |
|---|---|---|
| $200 a month more | about 3 years 5 months | about $38,600 |
| $5,000 lump sum every year | about 6 years | about $65,700 |
| Accelerated biweekly ($1,079 every two weeks) | about 3 years 4 months | about $36,700 |
The lump sums add up to more money over time than the other two, which is why they save the most. But even $200 a month, about 9% of the payment, takes more than three years off.
Try it
Pay it off sooner
The $400,000 mortgage at 4.25% over 25 years. Add extra payments and watch the teal line reach zero ahead of the original.
Paid off in
21 yr 7 mo
Sooner by
3 yr 5 mo
Interest saved
$38,641
- As it is
- With your extra payments
Know your limits
Prepaying beyond your privileges can trigger a penalty, so it's worth checking the exact rules in your mortgage documents before you send a lump sum. A few things vary between lenders: whether unused privileges carry over (usually not), whether the limit is based on the original or current balance, and whether a lump sum can be made any day or only on certain dates.
Open mortgages allow unlimited prepayments, but with a higher rate. At renewal, you can usually pay down any amount without a penalty, because the term has ended.
Trade-offs worth weighing
Money put into a mortgage is hard to get back out. Before prepaying, many people make sure they have an emergency fund, since a mortgage won't refund a lump sum if the furnace breaks.
It also makes sense to compare against other uses for the money. Higher-interest debt, like a credit card at 20%, costs far more than a mortgage at 4%. Some people also compare their mortgage rate with what the money might earn after tax in an RRSP, TFSA or FHSA. There's no single right answer, but the comparison is worth seeing.
Where to go next
Prepaying shortens a mortgage within the rules of your term. The next lesson looks at changing those rules: refinancing and breaking a mortgage early.
Worked figures are estimates based on the example inputs shown, checked October 11, 2026. Rates, rules and lender policies change, and your own numbers will differ. This is educational information, not financial advice.