How Canadian mortgage payments are calculated
Fixed-rate mortgages in Canada compound interest twice a year by law, while variable-rate mortgages usually compound monthly. A 5.00% fixed rate therefore has an effective annual rate of about 5.06%, and the payment is slightly lower than the same rate would give with U.S.-style monthly compounding.
This calculator converts the quoted rate to an effective annual rate, then to the rate for your payment frequency, and applies the standard loan formula over your amortization. Accelerated bi-weekly and weekly payments are the monthly payment divided by two or four, which adds roughly one extra monthly payment each year and shortens the amortization.
CMHC mortgage insurance
Mortgage default insurance is required when your down payment is under 20% of the price. The premium is a percentage of the loan and is added to your mortgage balance. CMHC, Sagen and Canada Guaranty charge the same rates.
| Down payment | Loan-to-value | Premium |
|---|---|---|
| 5% to 9.99% | 90.01% to 95% | 4.00% |
| 10% to 14.99% | 85.01% to 90% | 3.10% |
| 15% to 19.99% | 80.01% to 85% | 2.80% |
| 20% or more | 80% or less | None |
A 30-year amortization adds 0.20% to the premium. Sales tax on the premium in Ontario (8%), Quebec (9%), Manitoba (7%) and Saskatchewan (6%) is paid in cash at closing and cannot be added to the mortgage. Quebec's rate rises to 9.975% for premiums paid after December 31, 2026.
Minimum down payment
The minimum is 5% of the first $500,000 of the price and 10% of the portion from $500,000 to $1,499,999. Homes at $1.5 million or more need at least 20% down and cannot be insured. On a $900,000 home the minimum is $25,000 plus $40,000, or $65,000.
Common questions
What is the difference between amortization and term?
Amortization is the total time to pay off the mortgage, usually 25 or 30 years. The term is how long your rate and lender agreement last, commonly 5 years. At the end of the term you renew at the rates then available, on the remaining balance.
How long can my amortization be?
Insured mortgages are limited to 25 years, except that first-time buyers and buyers of newly built homes can choose 30 years. Many lenders offer 30 years on uninsured mortgages with 20% or more down.
What is the mortgage stress test?
Federally regulated lenders qualify you at the higher of your contract rate plus 2 percentage points or 5.25%. The stress-test payment shown here uses that rate so you can see the payment you would need to afford on paper.
Do accelerated payments save money?
Yes. Because accelerated bi-weekly and weekly payments add up to an extra month of payments each year, more goes to principal and you finish sooner. Compare the "Mortgage-free in" line across frequencies.
Should I choose a fixed or variable rate?
Fixed rates keep the payment steady for the whole term. Variable rates follow your lender's prime rate and may start lower, with the risk of rising payments or a slower payoff. The right choice depends on your budget and risk tolerance, so ask a mortgage professional.