Start with a $400,000 balance at 4.85% and 20 years left. Paying an extra $200 a month saves about $27,500 in interest and clears the mortgage more than two years early. Enter your own balance, rate and extra amount above to see what changes.
How extra payments work
Each extra dollar goes straight to principal. Interest is then charged on a smaller balance, so every later payment does more work. Time amplifies it. An early extra payment saves far more than the same amount paid late in the mortgage, because the interest it avoids has years to pile up.
Monthly extras and lump sums
The calculator covers both. In the example, a monthly extra lifts your regular payment of $2,596.21 to $2,796.21. A lump sum cuts the balance today and leaves the payment alone, so the mortgage ends sooner. Try a $10,000 lump sum by itself, then add a monthly amount and compare.
Take a $20,000 lump sum on the same mortgage with no monthly extra. The balance drops at once, the payment stays at $2,596.21, and the end date moves up by years. Tax refunds, bonuses and gifts are common sources. Timing matters, because money applied in the early years saves the most interest.
Check your prepayment limits
Most lenders cap how much you can prepay each year without a penalty. The cap is usually a share of the original loan and varies by lender and product. Some let you raise your regular payment, while others allow only a yearly lump sum. Get them in writing. Do it before you count on any savings, because a lender that says yes on the phone may apply a stricter rule when the payment actually arrives.
Prepay or invest?
A prepaid dollar earns a guaranteed return equal to your mortgage rate. In a TFSA or RRSP a dollar can earn more or less, and you can still reach it if needed. Many do both. Prepayment is hard to undo, so build an emergency fund first.
What this estimate assumes
It assumes one fixed rate for the whole period, with monthly payments. Real life brings several renewals, each at a different rate, and often a change of lender or a move along the way. Use it to compare choices. Don’t read it as a forecast.
Mistakes to avoid
Don’t drain your savings to prepay. Ever. Keep cash for repairs. Watch the yearly limit as well, since one large payment can cross it. Prepaying also won’t lower your required payment unless you renew or ask for a change.
Open and closed mortgages
An open mortgage allows any repayment at any time, usually at a higher rate. A closed one has a lower rate but limits prepayment. Most Canadians pick closed, since the lower rate matters more to them than the freedom to repay at will. Expecting a windfall soon? Ask what an open or partly open option would cost.
Where to go next
The amortization schedule calculator shows the full payment schedule. Thinking of changing lenders? The refinance calculator adds the penalty and fees. Accelerated bi-weekly payments are covered by the mortgage payment calculator.
Frequently asked questions
How much interest can extra payments save?
On a $400,000 balance at 4.85% with 20 years left, $200 extra each month saves about $27,500.
Is a lump sum better than monthly extras?
A lump sum saves more the earlier you make it. Monthly extras are easier to keep up. You can combine both.
Will my lender charge a penalty?
Only if you pass your yearly prepayment limit. Ask your lender for the limit.
Do extra payments shorten the amortization?
Yes. The payment stays the same in your contract, but the balance falls faster and the mortgage ends sooner.
Should I prepay my mortgage or invest?
Prepaying gives a certain return equal to your rate. Investing may earn more or less. Many people do some of each.
Does this work for variable rates?
It gives a fair estimate. Variable rates change, and so will the result.
Sources and updates
Last reviewed: . Full disclaimer. How we build calculators. Editorial policy.
Estimate only. This calculator gives general information for planning. It is not tax, legal or financial advice, and it is not affiliated with the City of Toronto, MPAC or the Canada Revenue Agency. Results depend on the numbers you enter and may differ from official amounts. Check official sources or a qualified professional before you decide.