How mortgage payments are calculated in Canada
In Canada, the law requires fixed mortgage rates to be compounded semi-annually (twice a year), not monthly as in the United States. An advertised 4.5% rate therefore works out to an effective monthly rate slightly below 4.5% ÷ 12. This calculator uses the Canadian method, so it's more accurate than American calculators.
Payment = loan × i ÷ (1 − (1 + i)^−n)
Mortgage default insurance (CMHC)
If your down payment is less than 20% of the purchase price, the mortgage must be insured by CMHC, Sagen or Canada Guaranty. The premium is added to the mortgage amount.
| Down payment | Premium |
|---|---|
| 5% to 9.99% | 4.00% |
| 10% to 14.99% | 3.10% |
| 15% to 19.99% | 2.80% |
| 20% or more | None |
In Ontario, Quebec and Saskatchewan, provincial sales tax applies to the insurance premium (8% in Ontario). It can't be added to the mortgage and must be paid at closing.
Accelerated payments: save years of interest
An accelerated biweekly payment is half your monthly payment, paid 26 times a year. That adds up to one extra monthly payment every year, which shortens your amortization by several years and significantly reduces total interest.