Early payoff plan
Stack accelerated bi-weekly, an extra monthly amount, and an annual lump sum. See exactly how much earlier you'd be mortgage-free.
Your scenario
Result
How an early-payoff plan compounds
Three prepayment levers work together to retire a Canadian mortgage years faster: accelerated bi-weekly (one extra monthly payment per year), an extra fixed amount each month, and an annual lump sum from bonus or tax refund. Stacking all three on a typical $540k mortgage at 4.84% can save $130,000+ in interest and cut 6-8 years off the amortization.
What's allowed under standard Canadian mortgages
Most A-tier closed Canadian mortgages allow 15-20% of original principal in lump-sum prepayments per year and 15-20% payment increases per year — all penalty-free. Confirm your specific contract's privileges before maxing.
- RBC, CIBC, Manulife — typically 10-15% / 10-15%
- TD, Scotia — typically 15% / 15%
- BMO — typically 20% / 20%
- First National, MCAP, Merix — typically 20% / 20%
Which lever to pull first
- If you have a regular bonus or tax refund: start with the annual lump sum. Single biggest acceleration per dollar contributed.
- If your monthly cash flow has slack: add extra monthly. Compounds smoothly and reduces year-1 interest the most.
- If you're salaried on T4 with bi-weekly pay: accelerated bi-weekly is automatic and roughly equivalent to a 1-month bonus payment per year.
Why this beats throwing it in an investment account
Paying down your mortgage at 4.84% is equivalent to a guaranteed, tax-free 4.84% return. To beat it with investments, you need to earn 6.5%+ in a TFSA (or higher in a non-registered account after tax). For risk-adjusted comparison, most Canadian borrowers are better off prepaying the mortgage first, then investing.
When NOT to accelerate
- You haven't maxed your FHSA, TFSA, or RRSP — those tax shelters often beat the math
- You have higher-interest debt (credit cards, unsecured LOC) — pay those first
- You might break the mortgage in < 12 months — accelerated balance reduces but doesn't affect the IRD calculation in some lenders' favour
- You don't have a 3-6 month emergency fund
Related
Questions about this calculator
- What is the fastest way to pay a mortgage off early?
- Combine the levers rather than picking one: accelerated bi-weekly payments, a payment increase within your privilege, and an annual lump sum applied as early in the year as possible. Each is applied entirely to principal and compounds with the others.
- Should the lump sum shorten the amortization or lower the payment?
- Shorten the amortization, which is the default at most lenders. Re-amortizing to lower the payment gives up nearly all of the interest saving — it converts a permanent gain into monthly cash flow.
- When in the year should I make the payment?
- As early as your privilege allows, and check whether it resets on the calendar year or on your mortgage anniversary. A lump sum sitting unpaid is a year of interest you did not have to pay on that amount.
- Does paying early affect my renewal?
- Only helpfully. A smaller balance at renewal means less exposure to whatever rates are then, more equity, and more lenders willing to compete for the switch. It does not change your renewal date.