Pay Off Your Mortgage Faster Without Penalties Using the Prepayment Privileges in Your Mortgage Contract
Planiprêt | 28 September 2026
Florence had just received a $5,000 bonus. Her first instinct: put it on her mortgage. Her second instinct: do nothing, because she had heard you pay a penalty when you repay before the end of the term.
Both instincts were half right. Florence did have a closed mortgage, and repaying too much would have triggered fees. But her contract also included prepayment privileges, amounts she could pay on top of her regular payments each year with no penalty at all. She had never read them.
Many homeowners are in the same situation. We compare rates when we sign, then forget the rest of the contract. Yet these privileges can take years off your amortization.
Closed or open mortgage: where privileges come from
An open mortgage can be repaid in full or in part at any time, with no penalty. In exchange, the rate is usually higher. A closed mortgage, the most common kind, offers a better rate but limits how much extra you can repay before the end of the term.
Those limits are the privileges. As long as you stay within them, there are no fees. If you go beyond them, the lender may charge a penalty on the excess. The federal Code of Conduct also requires lenders to tell you each year how much you can prepay without charges.
Three levers you can use
- Lump-sum payments. You pay an amount directly against the principal. Depending on the lender and the product, the annual limit is often around 10%, 15% or 20% of the loan amount. With most lenders, any unused portion does not carry over to the following year.
- Increasing your payments. You raise your regular payment. Some lenders let you go as high as double the payment set out in your contract. Every extra dollar goes entirely to principal.
- Accelerated frequency. By switching to accelerated weekly or biweekly payments, you make the equivalent of one extra monthly payment per year, almost without noticing.
What this means for Florence
Take a $400,000 mortgage amortized over 25 years, with a hypothetical 4.5% rate that stays the same for the life of the loan. The monthly payment is about $2,214.
- Changing nothing: about $264,000 in interest over 25 years.
- Adding $200 per month to the payment: about 3.5 fewer years and close to $42,000 in interest saved.
- Switching to accelerated biweekly payments: just over 3 fewer years and about $40,000 in interest saved.
- Paying a $5,000 lump sum each year: about 6 fewer years and more than $70,000 in interest saved.
Example provided for illustration only. In reality, your rate will change at each renewal.
None of these scenarios exceeds the usual privileges of a closed mortgage. Florence had no penalty to worry about for her bonus.
The details that vary from one lender to another
This is where two mortgages at the same rate can turn out to be very different. Before signing, or at renewal, here is what is worth checking:
- The allowed percentage for lump-sum payments, and the amount it is calculated on.
- The period covered: calendar year or the year starting from the loan’s anniversary date.
- When you can pay: at any time, or only on certain dates.
- Whether you can go back to your original payment if your situation changes after an increase.
- Discounted-rate products, which sometimes offer more limited privileges in exchange for the better rate.
If you expect bonuses, an inheritance or proceeds from a sale during your term, these conditions can matter more than a few hundredths of a point on the rate.
Paying faster, yes, but not at any cost
A dollar put on your mortgage is no longer in your account. Before accelerating, make sure you have a cushion for the unexpected. Some homeowners pair their mortgage with a home equity line of credit, which lets them access part of the repaid principal if needed. To compare faster repayment with saving or investing, a financial planner is the right person to consult.
One more useful habit: renewing at a lower rate reduces your payment. If your budget allows it, keeping the same payment as before is a simple way to pay faster with no extra effort.
What we look at with you
When we compare offers, we don’t just look at the rate. We also look at what each contract lets you do during the term, based on your plans. And if you already have a mortgage, we can help you read yours so you know exactly how much you can prepay this year, at no cost.
Let’s talk it through together. As you probably already know, our services are free.
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