# How can homeowners use lump-sum prepayments effectively at renewal?

> Strategic lump-sum prepayments at renewal can significantly reduce the principal, leading to substantial long-term interest savings.

Category: Renewal
Last verified: 2026-02-18
Source: https://ratellow.com/faqs/renewal/how-can-homeowners-use-lump-sum-prepayments-effectively-at-renewal

## Answer
Strategic lump-sum prepayments at renewal can significantly reduce the principal, leading to substantial long-term interest savings. These payments are optional amounts made above regularly scheduled payments, excluding interest savings or penalties. Always verify prepayment terms with the lender, focusing on the penalty-free annual prepayment amount. Consider this example:

## Institutional highlights
- A prepayment is when you pay extra on your mortgage, beyond your regular payments, which helps you pay it off faster.
- You can make a one-time lump-sum payment or increase your regular payments to prepay your mortgage.
- If your mortgage is insured, you might be able to borrow back funds you've prepaid, but this isn't meant to help if you're struggling to make payments.
- If someone else takes over your insured mortgage, they can't borrow back any extra payments you made previously.
- Your lender keeps records related to anyone assuming your mortgage.

## Related guide
- https://ratellow.com/guides/renewal-lump-sum-max

## Sources
- OSFI exempts uninsured mortgage straight switches from the prescribed MQR and implements portfolio LTI limits — https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/osfi-exempts-uninsured-mortgage-straight-switches-prescribed-mqr-implements-portfolio-lti-limits
- Disclosure requirements — https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/residential-mortgage-underwriting-practices-procedures-guideline-2017#3.1
- I. Purpose and scope of the guideline — https://www.osfi-bsif.gc.ca/en/guidance/guidance-library/residential-mortgage-underwriting-practices-procedures-guideline-2017#1.0