Prepayment Lump Sum Calculator
You've got $15,000, $50,000, or $100,000 you want to throw at your mortgage. Will it actually save you years and tens of thousands in interest? Run the math — and see exactly how your lender's 10/15/20% privilege limit caps the benefit.
Prepayment Lump Sum Calculator
See how a one-time lump-sum payment shortens your amortization and saves interest.
A $25,000 lump sum saves $31,214 in interest and pays off your mortgage 1.9 years earlier.
A broker will confirm this with real lender quotes — for free.
How Canadian Prepayment Privileges Work
Every closed Canadian mortgage comes with prepayment privileges — the amount of extra principal you can pay per year without triggering a penalty. These are set in your commitment letter and vary by lender:
- 10% — Many Big 6 bank closed fixed mortgages (RBC, BMO, Scotiabank standard)
- 15% — Scotiabank Flex Value, First National standard, many monolines
- 20% — TD, CIBC, most monolines (MCAP, Strive, RFA, Equitable Bank)
- 25% — Rare, sometimes available on open mortgages or premium products
The percentage is usually calculated on original principal, not current balance, and resets each calendar year or on your mortgage anniversary. If you took out a $500,000 mortgage with 20% privileges, you can prepay up to $100,000 per year.
When a Lump Sum Makes Sense
- Work bonus, tax refund, inheritance — windfall money that you'd otherwise park in a savings account earning less than your mortgage rate
- At renewal — no privilege cap applies because there's no active term; you can put any amount down before signing the new mortgage
- Before a rate increase — maximizing principal reduction before rates reset higher lowers your renewal payment shock
- Ahead of amortization extension — If you're about to extend your amortization at renewal, a lump sum partly offsets the interest cost of the longer timeline
When to Skip or Delay
- You don't have an emergency fund — CFPB guidelines recommend 3–6 months of expenses in cash before aggressive mortgage prepayment
- You have higher-rate debt — 21.99% credit cards should always be paid before a 4.29% mortgage
- Your RRSP / TFSA isn't maxed — for marginal tax brackets above 43%, an RRSP contribution often beats mortgage prepayment after-tax
- Your GIC or HISA earns more than your mortgage rate — rare, but happens briefly when rates fall faster than GIC rates
- You're close to renewal — if you're within 120 days of renewal, wait and apply the money to the new balance penalty-free
The Compounding Power of an Early Lump Sum
A $25,000 lump sum in year 1 of a $500,000 / 4.29% / 25-year mortgage saves roughly $21,000 in interest and shaves 2 years off the amortization. The same $25,000 in year 15 saves only $6,000 and shaves 7 months. The math is simple: interest compounds on the remaining balance, so reducing the balance early compounds harder. If you're going to make a lump sum, make it soon — and make it as large as your privilege allows.
Frequently Asked Questions
What is a prepayment privilege on a Canadian mortgage? +
Most Canadian closed mortgages allow you to prepay 10–20% of the original principal each calendar year without penalty. Big 6 banks typically offer 10–15%, while monoline lenders and some Big 6 products (TD, CIBC) offer 20%. The privilege usually resets every 12 months from either the anniversary of your mortgage start date or calendar year — check your commitment letter.
Should I apply a lump sum now or wait until renewal? +
Applying now compounds longer. A $25,000 lump sum at 4.29% applied today saves more interest than the same amount applied in 24 months — because it reduces principal immediately and every monthly payment thereafter goes further against the remaining balance. The only reason to wait is if you've already used your annual privilege this year.
Does a lump sum reduce my mortgage payment? +
No — not automatically. A lump sum reduces your balance and shortens your amortization. Your payment stays the same, but more of each payment now goes to principal instead of interest. If you want a lower monthly payment, you need to also request a 're-amortization' from your lender, which is a separate (usually free) transaction at renewal.
What happens if I exceed my prepayment privilege? +
The excess amount is treated as a partial prepayment and triggers a prepayment penalty — typically the 3-month interest or IRD calculation on just the over-privilege portion. Most borrowers hit the annual limit once and then stop — the penalty on excess erases the interest savings. Better strategy: save the overage and apply it on next year's anniversary.
Can I combine lump sum, payment increase, and doubling up? +
Yes. Most Canadian lenders allow three separate prepayment tools: a lump-sum privilege (10–20% annual), a payment-increase privilege (usually 10–20% increase once per term), and double-up payments (match any regular payment). Using all three simultaneously can shave 5–10 years off a 25-year amortization.
Related Guides
Prepayment Privileges in Canada
Lump-sum, double-up, and 15/15 vs. 20/20 privilege breakdown.
Accelerated Payment Calculator
Shorten amortization with accelerated weekly or bi-weekly payments.
Payment Frequency Calculator
Accelerated bi-weekly vs. monthly — see total interest saved.
Mortgage Flex Features
Portability, prepayment, assumability — feature-by-feature.
Lower Your Payments at Renewal
Legitimate levers to reduce monthly payment pressure at renewal.
All Renewal Calculators
Payment, stress test, switch break-even, prepayment — all in one place.
Make Sure Your Lump Sum Doesn't Trigger a Penalty
A licensed mortgage broker can confirm your exact privilege limit and time the prepayment to max out savings — free.