Mortgage Payment and Prepayment Calculator (Canada)
Whether that extra dollar should go to the mortgage or to a TFSA is the prepayment versus investing guide and the priority against TFSA and RRSP room. The contract around the rate is the Canadian mortgage guide. Breaking the term and paying a penalty is a different calculator. That one is the IRD penalty guide, and it tells you to use the lender’s own penalty tool. Renting instead of carrying the loan at all is rent versus buy.
- The monthly rate is (1 + annual rate / 2) to the power of 1/6, minus 1. The payment is rounded to the cent. Each month’s interest is rounded to the cent.
- A $500,000 loan at 4.50 percent over 25 years is $2,767.36 a month, the same convention as the mortgage guide, which rounds it to $2,767.
- The contractual payment does not fall when you prepay. The balance hits zero sooner.
- The annual lump sum is applied on every 12th payment, after that month’s regular payment and after the extra monthly amount.
- Without extras, the $400,000 illustration runs 300 months and $297,925.98 of interest. With $200 a month and $5,000 a year, it runs 203 months and $190,817.38 of interest.
How much interest and time does a prepayment save?
Type the balance, the contract rate, and the amortization on the disclosure. Then type only the extra payment and the lump sum your privilege actually allows. A closed mortgage limits penalty-free prepayments. This page does not know the limit. If you type more than the privilege, the interest saved is fiction and the lender’s penalty is the real number.
Mortgage prepayment
The rate is converted the Canadian way: semi-annual compounding, not in advance, then a monthly payment. The contractual payment stays the same. Extra money shortens the time. This is not a penalty for breaking the term, and it does not know your annual prepayment privilege. Type only what the commitment lets you pay.
$107,108.60 interest saved
Contract payment $2,326.42 a month. Without extras: 25 years 0 months (300 payments), interest $297,925.98. With the extras: 16 years 11 months (203 payments), interest $190,817.38. Time saved: 97 months.
How is the payment built?
Canadian residential mortgages are quoted with interest compounded semi-annually, not in advance. The calculator turns that quote into a monthly rate by taking (1 + annual rate / 2) to the power of one-sixth, then subtracting 1. At 5 percent, half the rate is 2.5 percent, and the monthly rate is (1.025) to the power of 1/6, minus 1. The payment is the standard amortizing payment on that monthly rate, rounded to the nearest cent. Interest each month is the remaining balance times that monthly rate, also rounded to the cent. Principal is the payment minus that interest. An extra amount, and the anniversary lump sum, reduce principal and do not change the next contractual payment.
Payment $2,326.42. Baseline: 300 payments, which is 25 years 0 months, interest $297,925.98. With both prepayments: 203 payments, which is 16 years 11 months, interest $190,817.38. Interest saved $107,108.60. Time saved 97 months, which is 8 years 1 month. The lump sum lands on payments 12, 24, 36, and so on, and it is capped so it cannot overpay the last balance.
| Payments | Interest | |
|---|---|---|
| Contract payment $1,510.62, no extras | 240 | $112,547.37 |
| Same payment plus $100 a month | 219 | $101,252.95 |
| Difference | 21 months | $11,294.42 |
Both tables are the output of the assumptions in the headings. They are not a lender’s quote. A biweekly payment, a variable rate that changes, or a payment that is recalculated when you prepay will not match. Match the disclosure. If the lender’s schedule differs by more than rounding, their day count or their prepayment timing is different, and theirs governs.
What will this not tell you?
- Your prepayment privilege. Some contracts allow a percent of the original balance, some a percent of the current balance, some a double-up of the payment. The percent is in the commitment. FCAC’s prepayment pages are the consumer explanation of penalties when you exceed it.
- The interest-rate differential for breaking a closed term. Paying $200 extra inside the privilege is not the same as refinancing. The penalty guide walks through FCAC’s example. Use the lender’s calculator before you break anything.
- Whether the extra dollar beats a TFSA. Interest you do not pay on a principal residence is an after-tax, risk-free return equal to the contract rate. A TFSA return has to beat that rate after risk. The investing comparison is the neighbouring article. This tool only prices the mortgage side.
- Tax deductibility. Interest on the home you live in is not deductible, so the interest saved is not a tax event. Interest on a rental can be. Prepaying a deductible loan is a different decision. This page does not split them.
Frequently asked questions
Why is my bank’s payment a few dollars different?
The payment here is rounded to the cent, and interest is rounded to the cent each month. Lenders differ on when they round and on whether the first period is a full month. A few dollars on the payment is rounding. Hundreds of dollars means the rate, the amortization, or the balance you typed is not the disclosure.
Does the lump sum happen in month one?
No. It happens on each anniversary payment: month 12, month 24, and so on. If you will make the lump sum at the start, the interest saved will be a bit higher than this tool shows. The tool’s timing is stated so the $107,108.60 can be reproduced.
Can I type a biweekly payment?
Not in this version. The schedule is monthly. A biweekly contract has a different payment count. Do not divide the monthly payment by two and call it the bank’s accelerated biweekly. Accelerated biweekly is usually half the monthly payment, paid 26 times, which is more than 12 monthly payments.
What if the rate changes at renewal?
The tool holds one rate for the whole amortization. A five-year term at 5 percent and then an unknown renewal is not one 25-year rate. Run the remaining balance at the new rate when you have it. The renewal decision is the 2026 renewal guide.
Is the interest saved the same as money in my pocket today?
No. It is interest you do not pay over the shortened life of the loan. A dollar of interest avoided in year 16 is not a dollar in your account this month. The prepayment-versus-investing guide is the comparison with a return you could earn instead.
What happens if the payment does not cover the interest?
The tool stops and says the balance does not fall. That is a rate and payment combination that does not amortize. It is not a payment quote.
Sources
- Canadian mortgage guide — semi-annual compounding and the illustrative $2,767 payment on $500,000 at 4.50 percent.
- FCAC: prepayment penalties
- IRD versus three months’ interest
The prepayment is a choice. The penalty for guessing past the privilege is not.
Read the privilege before you type a lump sum larger than the contract allows. The tax character of the interest, if the property is not your home, is the 2026 tax guide.
Get the 2026 Tax Guide — $49 CAD
