What is a prepayment privilege?

Using a prepayment privilege could save you a lot of money over the life of your mortgage. Find out how it works in Canada.

Prepayment privileges vary between Canadian lenders. Options may include:

Making lump-sum payments up to a certain amount or percentage of your original mortgage
Increasing the amount of your mortgage payments by a certain percentage
Doubling up on a mortgage payment each year
Accelerating your mortgage payments (for example, from monthly to biweekly, or biweekly to weekly)

Most lenders limit how much you can prepay each year, unless you have an open mortgage. Open mortgages are more flexible, but they tend to have higher interest rates.

Example: “Amal paid off her mortgage three years early by exercising her prepayment privilege and paying an extra lump sum every year outside of her regular monthly payments.”

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