A closed mortgage limits how much you can pay ahead of schedule without a penalty. The allowance your contract gives you is called a prepayment privilege. This page explains how privileges work, compares what five banks publish, and lists what to check in your own contract. For the payoff strategies these privileges make possible, and what each saves, see how to pay off your mortgage early. More guides are in the refinancing and home equity hub.
What a prepayment privilege is
The Financial Consumer Agency of Canada (FCAC) defines a prepayment privilege as the amount you can put toward your mortgage on top of your regular payments without having to pay a prepayment penalty. It can let you:
- increase your regular payments by a certain percentage, and
- make lump-sum payments up to a certain amount or percentage of the original mortgage amount.
When a lump-sum limit is a percentage of the original amount, it doesn’t shrink as you pay the balance down. Privileges vary from lender to lender, and not all lenders allow them on closed mortgages. An open mortgage lets you prepay without a penalty, and it typically has a higher interest rate than a closed mortgage with a similar term.
What five banks publish
From each bank’s own page, as of October 1, 2026. Limits differ by product, so the terms in your contract are the ones that apply.
| Lender | Lump-sum prepayment | Increasing or doubling payments |
|---|---|---|
| RBC Royal Bank (closed mortgage) | up to 10% of the original principal amount of your mortgage once in every 12-month period | Double Up your regular mortgage payments (of principal and interest) |
| TD | up to 15% of the original principal amount on your mortgage once a year, without charge | Regular payments can be increased by up to 100% over the term without charge once per calendar year |
| Scotiabank | up to 10%, 15% or 20% of the original principal amount of your mortgage at any time during each year of the term, depending on the options you select | Match-a-Payment, which allows you to double your current mortgage payment of principal and interest on any regular payment date, depending on the mortgage |
| CIBC | an annual prepayment of 10%, 15% or 20% depending on your product | increase your payment amount up to 100% of the original regular payment at any time over the mortgage term |
| National Bank | up to 10% of the initial principal amount of your loan over each calendar year, without fees | Occasional payment increases (see the bank’s guide) |
Example: on a $500,000 original mortgage, TD’s lump-sum privilege of 15% allows up to $75,000 of lump sums a year, and RBC’s 10% allows up to $50,000. Both stay the same each year as the balance falls, because they’re based on the original principal.
What to check in your contract
The FCAC suggests checking the terms and conditions of your mortgage contract for:
- whether your lender allows prepayments at all;
- when you’re allowed to make them;
- whether there’s a minimum or a maximum amount you can prepay;
- what fees or penalties apply; and
- any other conditions.
If your lender is federally regulated, such as a bank, the prepayment privileges and penalties have to appear in an information box at the beginning of your mortgage agreement, and the lender has to tell you how it calculates the prepayment penalty.
How the limits work in practice
Unused room is usually lost. Most lenders limit the prepayment amount per year, and the FCAC notes that typically you can’t carry an unused amount from one year to the next.
Payment increases are hard to reverse. The FCAC notes that, normally, once you increase your payments, you can’t lower them until the end of the term.
Going over the limit costs a penalty. If you put more money toward your mortgage than the maximum allows, you pay a prepayment penalty; how it’s worked out is covered in how mortgage penalties are calculated. Some contracts take away the privilege altogether on a larger payment: National Bank’s guide says “You do not benefit from this privilege when you repay the balance in full or when the amount of the repayment is more than 10% of the initial principal amount.”
Before breaking or at the end of the term. The FCAC suggests making a lump-sum prepayment before you break your mortgage, so the penalty is based on a lower balance, though some lenders restrict prepaying close to the date you break the contract. At the end of the term you can make a lump-sum prepayment without a penalty. For whether breaking is worth it, see should you break your mortgage for a lower rate.
How much prepaying saves
Every dollar prepaid stops accruing interest for the rest of the amortization, so the earlier it’s paid, the more it saves. The worked example on the payoff page calculates the savings from lump sums, larger payments and accelerated payments on one hypothetical mortgage. A mortgage on the home you live in is a personal-use borrowing, so its interest isn’t tax-deductible: The borrowed money has to be used to earn income from a business or property, such as rent, interest or dividends; interest on money used for personal purposes isn't deductible.
Related resources
Sources
The figures and rules on this page come from these sources, last checked against them on October 1, 2026. How we check facts.
- Canada Revenue Agency: Line 22100 – Carrying charges, interest expenses and other expenses
- Canada Revenue Agency: Income Tax Folio S3-F6-C1, Interest Deductibility
- CIBC: What are Mortgage Prepayment Charges? | Mortgages | CIBC
- Financial Consumer Agency of Canada: Paying off your mortgage faster
- National Bank: Mortgage Prepayment and Prepayment Charges Guide
- RBC: Making a Mortgage Prepayment - RBC Royal Bank
- Scotiabank: How to pay off your mortgage faster and own your home | Posts
- TD: TD Mortgages & Rates - TD Canada Trust