What does an extra $100 mortgage payment change?

How much can $100 extra each month save?

In this constant-rate example, adding $100 monthly to a $400,000 mortgage at 4.5%, amortized over 25 years, reduces projected interest by $22,768.74 and finishes 22 months sooner. This uses Canadian semi-annual compounding and monthly payments. It is a scenario, not a rate forecast or a statement of your prepayment privileges.

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The assumptions behind the answer

Start with $400,000 financed, a 25-year amortization, a five-year term, monthly payments and a 4.5% nominal annual rate compounded twice a year. The illustration holds that rate constant beyond the initial term. It has no renewal rate, fees, penalties, lump sums or annual payment increases. The extra $100 starts with the first payment and continues until payoff.

The regular payment is $2,213.89. Adding $100 makes the initial recurring outlay $2,313.89. The annualized additional budget is $1,200 while twelve monthly extras are paid; it is not an extra $1,200 in a year after the mortgage has ended.

References: FCAC: Paying off your mortgage faster

Why the balance falls faster

Each month, interest is charged on the remaining balance. After interest, more of a larger payment reaches principal. The following period then begins with a smaller balance. The difference compounds over time, which is why the interest saving exceeds the first year’s extra payments.

For this contract convention, the monthly rate is (1 + 0.045 / 2)^(1/6) - 1. Calculate the amortizing payment over 300 months, then round each period’s interest and payments to cents. The final payment settles the remaining balance and cent-rounding residue, so it can differ from the regular payment. A separate 50-digit Decimal recurrence checks the published example.

References: FCAC: Paying off your mortgage faster

A five-year term is not a 25-year rate guarantee

The quoted term and the amortization answer different questions. Amortization is the initial repayment horizon; the term is how long the contract conditions apply. A renewal at a different rate changes the later payments and interest savings. The example’s constant future rate is a simplifying assumption.

Use the mortgage calculator to compare your renewal assumptions, rate stages, payment frequency and other prepayments. Changing monthly payments to weekly payments also changes how often an entered recurring extra is paid. Compare annual cash commitments, not just the extra amount shown beside one payment.

References: FCAC: Paying off your mortgage faster

Check the contract before changing payments

A calculator cannot establish what your lender permits. Contracts can limit increases or lump sums and can charge penalties for exceeding a prepayment privilege. Ask how an increase affects future payment flexibility and whether a different renewal or term-end option applies.

The illustration does not compare emergency savings, investment risk, taxes or alternative borrowing costs. It does not decide whether prepayment is suitable. You can save separate named scenarios and export their schedules without creating an account.

References: FCAC: Paying off your mortgage faster