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Mortgage Prepayment Calculator

See how much interest you could save — and how many months or years sooner you could be mortgage-free — by prepaying your Canadian mortgage.

$

Your current outstanding mortgage balance.

Rate type
%
years
$

Extra amount you'll pay on top of your normal monthly payment.

$

Optional one-off prepayment, e.g. from a bonus or tax refund. Leave at $0 to skip.

%

Most Canadian lenders allow penalty-free prepayments up to this % of the original principal per year before an Interest Rate Differential (IRD) or other charge applies.

Interest you'd save$48,296.95
Time saved42 months≈ 3.5 years
New payoff time258 months≈ 21.5 years
Total interest (baseline)$297,925.98
Total interest (with prepayments)$249,629.03
Baseline monthly payment$2,326.42
Baseline term300 months≈ 25.0 years

How this calculator works

Every month, your mortgage interest is charged on your outstanding balance. A prepayment goes straight to reducing that balance, so every future month's interest is calculated on a smaller number — the mortgage pays itself off faster, and the total interest charged over its life falls. This calculator builds two full amortization schedules side by side — a baseline schedule at your normal payment, and awith-prepayments schedule that applies your monthly extra payment (and optional lump sum) directly to principal each period, both using the correct Canadian semi-annual (fixed) or monthly (variable) compounding — then compares the two:

Interest saved = Baseline total interest − New total interest

The calculator also checks your planned prepayments against an editable lender prepayment privilege (most Canadian lenders default to around 15-20% of the original principal per year, penalty-free) and warns you if your plan would exceed it in the first year, since going over the limit typically triggers an Interest Rate Differential (IRD) or other prepayment charge.

Worked example

Take a $400,000 mortgage at 5% fixed over 25 years. Without prepaying, the baseline monthly payment and total interest over the full amortization form your starting point. Add a $200 monthly prepayment on top, and both the total interest and the time to pay off the mortgage fall — the calculator shows you the exact interest saved and months saved for your specific numbers, a combination that typically shortens a 25-year amortization by several years even from a relatively modest monthly prepayment.

What affects your result

  • Size of the prepayment — larger regular prepayments save proportionally more interest, since more of the balance is cleared sooner.
  • Timing — prepaying earlier in the amortization saves more interest than the same amount paid later, since it stops accruing interest sooner.
  • Your interest rate and rate type — the higher your rate, the more each dollar of balance costs you in interest; remember fixed rates compound semi-annually while variable rates compound monthly.
  • Remaining amortization — a longer remaining amortization gives prepayments more time to compound, so the same monthly prepayment saves more interest on a 30-year amortization than a 10-year one.
  • Your lender's annual prepayment privilege — exceeding the penalty-free cap can trigger an Interest Rate Differential (IRD) or other charge that eats into any savings.

A note on accuracy

This calculator computes both schedules on full, unrounded figures and only rounds for display, and correctly applies the Interest Act's semi-annual, not-in-advance compounding rule for fixed-rate mortgages. It assumes your lender keeps your contractual monthly payment fixed and simply shortens the amortization — some lenders instead let you reduce the monthly payment while keeping the original amortization, so check which applies to your mortgage. For guidance on prepayment privileges and charges, see theFinancial Consumer Agency of Canada.

Frequently asked questions

How much can I save by prepaying my Canadian mortgage?

It depends on your balance, rate, amortization, and how much you prepay — but even modest, regular prepayments can save a significant amount in interest and years off your amortization. For example, on a $400,000 mortgage at 5% over 25 years, prepaying by $200 a month can cut total interest meaningfully and pay the mortgage off several years earlier. Enter your own numbers into the calculator above for an exact figure.

How much can I prepay my mortgage without a penalty in Canada?

Most Canadian fixed-rate mortgage products allow penalty-free prepayments up to a set percentage of the ORIGINAL principal each calendar year — commonly 15%, sometimes up to 20% — before an Interest Rate Differential (IRD) or other prepayment charge applies to the excess. This limit is set by your specific mortgage contract, not by law, so check your mortgage documents for your exact privilege. The calculator above flags it if your planned prepayments would exceed the percentage you enter.

What are the benefits of prepaying my mortgage?

The two main benefits are less total interest paid (since interest is charged on your outstanding balance, a smaller balance means less interest going forward) and a shorter remaining amortization. Prepaying is especially effective early in the mortgage, when the balance — and therefore the interest charged on it — is at its highest. Weigh this against other priorities like an emergency fund, higher-interest debt, or RRSP/TFSA contributions.

Is it better to prepay monthly or with a lump sum?

Both reduce your balance and future interest, and mathematically an earlier prepayment (of either kind) saves slightly more interest than the same amount paid later, since it stops accruing interest sooner. Regular monthly prepayments are easier to build into a budget; a lump sum (for example from a tax refund or bonus) delivers a one-off reduction in the balance. The calculator above lets you model either, or both together.

Does prepaying reduce my monthly payment or shorten my amortization?

This depends on your lender — most Canadian mortgages keep your contractual monthly payment the same and simply pay the mortgage off earlier (which is what this calculator assumes), though some lenders let you choose to instead reduce your monthly payment while keeping the original amortization. Check with your lender which option applies to your specific product.

Does this calculator account for the semi-annual compounding rule?

Yes. Just like the pillar Mortgage Payment Calculator, this calculator applies the legally mandated semi-annual, not-in-advance compounding for fixed-rate mortgages (and monthly compounding for variable-rate mortgages) when building both the baseline and with-prepayments amortization schedules, so the interest-saved and time-saved figures reflect the true Canadian calculation, not a simplified nominal-rate approximation.

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