There are times that the economy is good and your cash flow will allow you to pay your monthly mortgage in advance. Mortgage prepayment options layout your flexibility in terms of paying mortgage payments or paying it off altogether without penalty.

But why is there a penalty if you want to pay early?

For one, prepayment decreases the interest you have to pay, which is considered an investment risk to lenders in the long run. So instead, you will usually find a prepayment penalty clause on your mortgage contract.


There are two options for you:

1. The percentage increase allowable on your original monthly payments is called the
monthly prepayment provision. It can range from 0-100% of your monthly mortgage, so it means that you can double up your payment in a given month.

2. On the other hand,
the lump sum provision allows you to make a lump sum payment on the mortgage principal. You can be privileged up to 25% of the principal per year.


The popularity of prepayment is growing among Canadians, around 84% saying that they can afford to pay up to $300 more than their original payments. By 2010, 28% of mortgage payments were increased, some by monthly payments, others by lump sum with a little 7% who did both.

So if you want to take advantage of this option, take a comparison on the allowances different lenders can give, even right from the start of your home-buying process.


We all know that paying ahead will help us get over the loan sooner, you will also have to consider other costs you incurred in relation to homebuying. For instance, you raised your down-payment through RRSP-which is another loan you have to pay back in 15 years. By contributing more to your RRSP and use the tax savings, your outstanding balance decrease, and your will have one less obligation paid-off.


Other fast track mechanisms may include switching frequency of payment from monthly to weekly or accelerated bi-weekly. These options, sans the penalty, has been allowed by lenders due to its increasing demand. Since some months can have one more week than the rest of the year, your weekly cash outlay for the year is actually greater than how you paid it on a monthly basis.


SitemapPrivacy Policy