Depending on the lender you can pay 15% to 20% as a privilege payment each year which goes fully to principal/equity which means you can save on interest costs and pay off your mortgage faster.
Let’s look at an example:
Say you took out a mortgage for $300,000 with 30 years to pay it off. You receive $5,000 from a CRA tax refund or as a gift or from a company bonus. If you apply the $5,000 as a privilege payment then not only will you pay off your mortgage faster by approximately 8 months but you will also save about $4,000 in interest costs.
