- Closed fixed: rate and payment set for the term; limited prepayments; penalty is usually the greater of 3 months’ interest and an IRD.
- Closed variable: prime ± a spread; penalty usually 3 months’ interest.
- Open: repay any amount at any time without a penalty, at a higher rate; usually short terms.
- Readvanceable: a mortgage inside a HELOC plan, so repaid principal can be borrowed again.
What types of mortgages do the big banks sell?
- Closed fixed-rate. The standard choice. Your rate is locked for the term (often 1 to 10 years). You can prepay within the bank’s annual privileges; anything more triggers a penalty. See fixed rates.
- Closed variable-rate. Your rate is the bank’s prime plus or minus a spread. Some banks change the payment when prime changes; others keep it fixed and change the principal portion. See variable rates.
- Open mortgages. Pay off any amount at any time without a penalty. Useful if you expect to sell or receive a large sum soon; the rate is higher than a closed term.
- Cash-back mortgages. The bank pays you a percentage of the mortgage at closing in exchange for a higher rate; if you break the term early the contract may require you to repay some of it.
- Readvanceable plans. The mortgage sits inside a home equity plan with a line of credit. See HELOCs and readvanceable mortgages.
How much can you prepay at each big bank?
How much you can pay down early on a closed mortgage, in each bank’s words:
| Bank | Prepayment privileges (closed) |
|---|---|
| RBC Royal Bank | 10% lump sum a year, 10% payment increase every 12 months, plus Double-Up payments. |
| TD Canada Trust | 15% lump sum a year and payment increases up to 100%, once per calendar year. |
| Scotiabank | 10%, 15% or 20% of the original principal a year, depending on the options chosen. |
| BMO Bank of Montreal | 20% lump sum and 20% payment increase a year on closed mortgages; Smart Fixed 10% / 10%. |
| CIBC | 10%, 15% or 20% a year depending on product; payment increases up to 100%. |
| National Bank | 10% of the principal a calendar year, plus an extra payment up to your regular payment on each payment date. |
Which mortgage products does this guide not cover?
Reverse mortgages, commercial mortgages and investment-property lending are outside this guide. FCAC explains reverse mortgages (up to 55% of the appraised value minus any mortgage balance, under its home equity guide), and the MITEY Network’s CanadianBanks.ca covers the institutions themselves.
Which mortgage type fits your plans?
Start from what is likely to happen in the next few years, then pick the product whose fine print fits it.
| If you expect to… | Look at | Why |
|---|---|---|
| Stay put and want a known payment | Closed fixed | Rate and payment set for the term |
| Move or refinance within the term | Closed variable, or a portable fixed | Variable penalties are usually 3 months’ interest; porting can avoid a fixed penalty |
| Pay down large lump sums | The highest prepayment privilege | Privileges range from 10% to 20% a year |
| Sell or repay in full very soon | Open | No penalty, at a higher rate |
| Re-borrow equity over time | Readvanceable plan | Repaid principal can be borrowed again |
| Need cash at closing | Cash back | Higher rate, and some cash back may be repayable if you break |
How much can prepaying save on a big-bank mortgage?
Prepayment privileges are worth more than they look. On $500,000 at TD’s 5.29% 5-year special (November 2, 2026) over 25 years, if that rate held for the whole amortization:
| Paid off in | Total interest | Interest saved | |
|---|---|---|---|
| Regular payments only | 25.0 years | $397,335 | — |
| $10,000 lump sum every year | 16.4 years | $248,046 | $149,288 |
| Payment raised 10% from day one | 20.8 years | $321,701 | $75,634 |
What short, convertible and open terms do the banks offer?
- RBC: a 6-month convertible; open 6-month and 1-year fixed terms and a 5-year open variable.
- TD: a 6-month convertible and a 1-year open; full prepayment of an open mortgage is subject to an administration fee by year of discharge.
- Scotiabank: 6-month and 1-year open; a 6-month flexible/closed that can be locked into a closed fixed term of 1 year or longer without a prepayment charge.
- BMO: a 6-month convertible, 6-month and 1-year open fixed terms, and a 3-year open variable.
- CIBC: a Convertible, a Fixed-Rate Open and a Variable Rate Open mortgage.
- National Bank: fixed closed terms from 3 months, and 6-month and 1-year open terms.
Do prepayment privileges reset by calendar year or by mortgage year?
It varies, and it decides when you can use the next lump sum. National Bank’s 10% applies during the same calendar year, and TD and BMO allow a payment increase once per calendar year. Scotiabank’s privilege applies during each year of the term, and RBC’s payment increase is once in each 12-month period. If you plan a lump sum late in December or just before renewal, check the dates in your contract and ask whether unused room carries forward.
What should you know before taking a cash-back mortgage?
The cash comes with strings. CIBC says you may have to repay cash back when you prepay in full, switch, renew early, refinance, have the mortgage assumed or port. National Bank says cash-back offers must be partly repaid, pro rata, if the mortgage is prepaid, renegotiated, refinanced or transferred before the term ends. Compare the higher rate’s extra interest over the term with the cash you receive, in the bank vs broker calculator.
Worked example: prepayment room on a $500,000 mortgage
How much you could pay down each year without a penalty on the original $500,000, in each bank’s words:
| Bank | Lump sum a year | Payment increase |
|---|---|---|
| RBC | $50,000 | 10% once every 12 months + Double-Up |
| TD | $75,000 | up to 100% once a year |
| Scotiabank | $75,000 | most popular option: 15% (10%, 15% or 20% by option) |
| BMO | $100,000 | 20% (Smart Fixed 10%) |
| CIBC | $100,000 | up to 100% (privilege 10–20% by product) |
| National Bank | $50,000 | extra payment up to your regular payment each date |
Computed by this site’s engine from each bank’s published rates (November 2, 2026) and the rules cited below. An example, not a quote.
What this means for you
- If you’ll pay down fast, pick the product with the bigger privilege even at a slightly higher rate.
- Open mortgages cost more; use them only if you expect to repay soon.
- Readvanceable plans make re-borrowing easy; set your own repayment plan.
Rules change. Every figure on this page links to the official source and shows when we checked it. If something looks out of date, tell us and we will re-check.
Frequently asked questions
Which product should I choose?
Start with how likely you are to move, refinance or pay down a lump sum in the next few years. If any of those is likely, the prepayment privileges and penalty method matter more than a small rate difference. Price your scenarios in the bank vs broker calculator.
What is a convertible mortgage?
A short closed term that you can convert into a longer fixed term. RBC, TD and BMO list a 6-month convertible, and Scotiabank says its 6-month flexible/closed can be locked into a closed fixed term of 1 year or longer without a prepayment charge. Ask which terms you can convert to.
Which big bank lets you prepay the most?
On lump sums, BMO’s regular closed mortgages allow 20% of the original amount a year (10% on Smart Fixed), and Scotiabank and CIBC allow up to 20% depending on the options or product. On payment increases, TD and CIBC allow up to 100%. The table above has each bank’s wording.
Sources
- Reduce or avoid prepayment penalties — FCAC, checked Oct 31, 2026
- Borrowing money using home equity (HELOC, home equity loan, reverse mortgage) — FCAC, checked Oct 31, 2026
- Mortgage terms and amortization — FCAC, checked Oct 31, 2026
- Mortgage rates — RBC Royal Bank, checked Nov 2, 2026
- Mortgage rates — TD Canada Trust, checked Nov 2, 2026
- TD mortgages and rates (products) — TD Canada Trust, checked Oct 31, 2026
- Fixed rate mortgages — Scotiabank, checked Oct 31, 2026
- Understanding mortgage prepayments and charges — Scotiabank, checked Oct 31, 2026
- Today’s mortgage rates — BMO, checked Nov 2, 2026
- Paying off your mortgage faster (prepayment privileges, prepayment charges, portability) — BMO, checked Nov 2, 2026
- Mortgage rates across Canada — CIBC, checked Nov 2, 2026
- Mortgage prepayment (privileges and prepayment charges) — CIBC, checked Oct 31, 2026
- Mortgage rates — National Bank, checked Nov 2, 2026
- Mortgage renewal — National Bank, checked Oct 31, 2026
Educational information only, not financial, legal or tax advice. BankMortgages.ca is independent and is not affiliated with, endorsed by or paid by any bank named on this site. Bank terms change: confirm every rate and term with the lender and the official sources linked on each page before you act. Read the full disclaimer.
