How prepayment saves interest
Every payment covers the period's interest first, and only the remainder reduces the principal. Anything you pay beyond the scheduled amount goes straight against the principal, so it stops accruing interest for the entire rest of the amortization. That is why a single lump sum early on removes far more interest than the same amount paid near the end.
This page simulates the mortgage one payment period at a time using the semi-annual compounding required for Canadian fixed-rate mortgages, applies your extra payment each period and your lump sum once a year, and stops when the balance reaches zero. The baseline it compares against is the same mortgage paid monthly with no prepayments at all.
What accelerated bi-weekly actually does
Accelerated bi-weekly means you take the regular monthly payment, cut it in half, and pay that every two weeks. There are 26 two-week periods in a year, so you make the equivalent of 13 monthly payments instead of 12. That thirteenth payment is the whole trick: it goes almost entirely against principal, which is why the mortgage clears sooner even if you change nothing else. This calculator models each of the 26 payments individually rather than approximating it.
Check your prepayment privileges first
Most Canadian mortgages limit how much you may prepay in a year without a penalty, typically a percentage of the original principal for lump sums plus an allowed increase to the regular payment. The limits, the reset date and whether unused room carries forward all vary by lender and by product, and an open mortgage may have no limit at all. Read your own mortgage commitment or ask your lender before scheduling a large prepayment. This calculator does not apply any cap and does not estimate penalties.
FAQ
When in the year is the lump sum applied?
Once every twelve months of elapsed time, after that period's regular payment. Many lenders restrict lump sums to a specific anniversary date or window, so your real timing may differ.
Does prepaying lower my payment?
Usually not. On most Canadian mortgages a prepayment shortens the amortization while the payment stays the same. Some lenders will recast the payment on request, which is a different outcome from the one modelled here.
Is prepaying better than investing the money?
That depends on your rate, your marginal tax rate, your other debts and your own risk tolerance, so there is no general answer. TaxTally shows the mortgage arithmetic only and does not give advice.
Estimate only. Excludes property tax, insurance, CMHC premiums, prepayment penalties and any fees. Not financial advice.