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Making Principal Prepayments
A great way to save on interest costs and reduce the life of your mortgage is by making annual principal payments.
- If you choose a closed mortgage, you may prepay up to 10% of the original principal amount of your mortgage once in every 12-month period. The prepayment is applied directly to the principal of your mortgage.
- You may also Double Up your regular mortgage payments (of principal and interest).
- You can make a principal prepayment of $500 or more to your open mortgage as often as you like!
- Plus, you can make principal prepayments of any amount you wish on your mortgage principal at renewal time.
A principal prepayment of $2,000 a year can make a substantial difference in the time it takes to pay off your mortgage. Take a look:
Example: $80,000 Mortgage at 8.00%*
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Mortgage 25-year Amortization |
Effect of $2,000 annual prepayment |
| Mortgage repaid (years) |
25 |
14.75 |
| Total interest cost** |
$103,165 |
$55,887 |
| Interest savings** vs. 25-year mortgage |
N/A |
$47,278 |
* Calculated, semi-annually not in advance.
** Over the life of the mortgage, assuming constant interest rate throughout amortization period.
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Whatever home buying stage you're in, we can offer you real savings and sound advice. Contact a mortgage specialist today! |
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Client Story
Randy & Neil using
RBC Homeline Plan
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