Interest on a mortgage is calculated on the outstanding balance. Every dollar of principal repaid early removes all the interest that dollar would otherwise have generated for the remaining years. That is why small changes compound into large ones.
One: accelerated payment frequency
The best value on this page, because it is free and most people are not using it.
A monthly payment means twelve payments a year. Accelerated biweekly takes that monthly payment, halves it, and takes it every two weeks. Since there are twenty-six two-week periods in a year, you make the equivalent of thirteen monthly payments rather than twelve.
That one extra payment goes entirely to principal. On a typical twenty-five year mortgage it shortens the amortisation by roughly three years and saves a substantial sum in interest.
Note the word accelerated. Ordinary biweekly simply divides your annual payment across twenty-six periods and achieves nothing. Ask specifically for accelerated, and check what you are currently on, because plenty of people believe they are accelerated and are not.
Two: increase the regular payment
Most mortgages allow you to increase your regular payment by a set percentage each year, commonly ten to twenty percent, without penalty.
The advantage over a lump sum is that it is automatic and permanent. An extra hundred dollars a month, applied from the start, removes years from the amortisation without ever requiring a decision.
Most lenders also allow you to reduce it back to the contractual amount if circumstances change, which makes it low-risk. Confirm that before increasing.
Three: annual lump sums
Most mortgages permit a prepayment of ten to twenty percent of the original principal each year without penalty. It goes entirely to principal.
Timing matters more than people realise. A lump sum in January of your mortgage year saves a full year of interest on that amount compared with the same payment in December. If you receive a bonus or a tax refund, apply it promptly.
Check whether your privilege runs on the calendar year or your mortgage anniversary. Unused privilege usually does not carry forward.
Four: round up, and keep old payments going
Small and genuinely effective.
Rounding a payment of $1,847 up to $1,900 costs $53 and every dollar is principal. Over a full amortisation it is worth considerably more than it sounds.
The stronger version: when a car loan ends, redirect that payment to the mortgage. You were managing without the money already, so it costs no change in lifestyle. The same applies at renewal if your rate falls, where keeping the old payment level is one of the highest-value moves available. See renewals.
Five: shorten the amortisation at renewal
At maturity you can reset the amortisation deliberately rather than letting it run down.
Moving from twenty remaining years to fifteen raises the payment and cuts total interest sharply. It is done free at renewal and it enforces the discipline automatically rather than relying on you to make voluntary payments.
The trade-off is flexibility. A shorter amortisation is a contractual obligation, whereas voluntary prepayments can be stopped if things get tight. For most households, using prepayment privileges on a longer amortisation is the safer version of the same strategy.
Before you do any of this
Two honest checks.
Is there more expensive debt? Paying down a credit card at consumer rates returns several times what paying down a mortgage does. Clear the expensive debt first, always. If the balances are large, consolidating them may be the better first move.
Is there a better use for the money? Prepaying a mortgage returns exactly your mortgage rate, guaranteed and tax-free in effect. Against that, an employer pension match is an immediate and unbeatable return, and an RRSP contribution may be worth more if you are in a high bracket. There is no universally right answer, and it is worth actually comparing rather than assuming the mortgage wins.
Check your privileges before you plan
All of this depends on what your specific mortgage permits. Restricted products, which often carry the sharpest rates, sometimes have minimal prepayment privileges or none.
Find out what percentage you can prepay annually, whether the regular payment can be increased, whether payments can be made at any time or only on anniversary dates, and whether unused privilege carries forward. If you intend to pay a mortgage down aggressively, those features are worth more than a small rate advantage. See what to compare beyond rate.
The calculator below shows what different amortisations do to a payment, which gives you a sense of what shortening the term is worth.
