Why a Canadian mortgage needs its own calculator
Canadian mortgages follow rules that most online calculators get wrong:
- Semi-annual compounding. Under section 6 of the Interest Act, fixed-rate mortgage rates are quoted with interest compounded twice a year, not in advance. A US-style calculator that compounds monthly overstates your payment.
- Mortgage default insurance. If you put down less than 20%, the loan must be insured by CMHC, Sagen or Canada Guaranty, and the premium is usually added to your mortgage.
- A legal minimum down payment that depends on the price.
- Term vs amortization. You repay over 25 or 30 years but renew your rate every few years, so the balance at the end of the term matters.
- Accelerated payments, which many Canadian lenders offer and which can cut years off your mortgage.
The calculator above handles all five.
The payment formula
First, turn the quoted yearly rate into a rate per payment:
r = quoted yearly rate · p = payments a year (12, 24, 26 or 52)
Then use the standard loan payment formula:
P = mortgage including any insurance premium · n = amortization years × p
At 5%, the monthly rate is 1.025^(1/6) − 1 = 0.41239%, slightly less than 5% ÷ 12 = 0.41667%. The effective yearly rate is 1.025² − 1 = 5.0625%. On $100,000 over 25 years, that gives $581.60 a month.
Accelerated payments work differently. Accelerated bi-weekly is your monthly payment ÷ 2, paid every two weeks (26 times a year). Accelerated weekly is the monthly payment ÷ 4, paid every week (52 times a year). Either way you pay the equivalent of 13 monthly payments a year instead of 12, and the extra goes straight to principal.
Minimum down payment
| Purchase price | Minimum down payment |
|---|---|
| $500,000 or less | 5% of the price |
| $500,000 to $1,499,999 | 5% of the first $500,000 + 10% of the portion above $500,000 |
| $1,500,000 or more | 20% of the price (default insurance is not available) |
Examples: a $400,000 home needs $20,000; a $650,000 home needs $25,000 + $15,000 = $40,000 (6.15%); a $1,600,000 home needs $320,000.
Mortgage default insurance premiums
When you put down less than 20%, the insurer charges a one-time premium as a percentage of the loan. The premium rate depends on the loan-to-value ratio (LTV):
| Loan-to-value | Premium on the loan |
|---|---|
| Up to 65% | 0.60% |
| 65.01% to 75% | 1.70% |
| 75.01% to 80% | 2.40% |
| 80.01% to 85% | 2.80% |
| 85.01% to 90% | 3.10% |
| 90.01% to 95% | 4.00% |
A 30-year amortization on an insured mortgage adds 0.20% to the premium. Since 15 December 2024, insured 30-year amortizations are open to first-time buyers and buyers of newly built homes, and the price cap for insured mortgages is $1.5 million. In Ontario (8%) and Quebec (9%), provincial sales tax applies to the premium; it is paid in cash at closing and cannot be added to the mortgage. Insurers publish their own tables, so confirm the current rates with your lender.
Worked example 1: a $650,000 home with 10% down
You put down $65,000 and borrow $585,000 at 4.5% over 25 years, paying monthly, on a 5-year term.
- LTV: 585,000 ÷ 650,000 = 90%, so the premium is 3.10%: $18,135
- Total mortgage: $585,000 + $18,135 = $603,135
- Monthly rate: 1.0225^(1/6) − 1 = 0.37155%
- Payment: $3,338.19 a month
- Over the 5-year term you pay $126,687.09 of interest and $73,604.26 of principal
- Balance at renewal: $529,530.74
- Interest over the full 25 years, if the rate never changed: $398,321.73
- In Ontario, 8% tax on the premium adds $1,450.80 at closing
A calculator that compounds monthly would show $3,352.42, about $14 a month too high.
Worked example 2: payment frequency on the same mortgage
Same $603,135 mortgage at 4.5% over 25 years:
| Frequency | Payment | Mortgage-free in | Total interest | Interest saved vs monthly |
|---|---|---|---|---|
| Monthly | $3,338.19 | 25 years | $398,321.73 | — |
| Semi-monthly | $1,667.55 | 25 years | $397,393.27 | $928.46 |
| Bi-weekly | $1,539.16 | 25 years | $397,321.90 | $999.83 |
| Weekly | $769.25 | 25 years | $396,893.81 | $1,427.92 |
| Accelerated bi-weekly | $1,669.09 | about 21 years 8 months | $337,913.93 | $60,407.81 |
| Accelerated weekly | $834.55 | about 21 years 8 months | $337,236.01 | $61,085.72 |
Regular bi-weekly and weekly payments cost the same per year as monthly ones, so they save only a little through timing. Accelerated payments add one extra monthly payment a year and save around $60,000 here. At renewal you would owe $510,629.36 instead of $529,530.74.
Worked example 3: 20% down and no insurance
Put $130,000 down on the same home and you borrow $520,000 with no premium. The monthly payment falls to $2,878.06, and interest over 25 years is $343,417.81. Compared with example 1, the larger down payment saves $460 a month, the $18,135 premium, and about $55,000 of interest. The down payment calculator can help you plan how long saving the extra would take.
Monthly payment per $100,000
| Rate | 25 years | 30 years |
|---|---|---|
| 4% | $526.02 | $475.52 |
| 5% | $581.60 | $533.69 |
| 6% | $639.81 | $594.82 |
Multiply by your mortgage in hundreds of thousands for a quick estimate. Remember to add any insurance premium to the mortgage first.
Tips
- Plan for renewal. Your rate is fixed only for the term. Use the balance at the end of the term to test what a higher renewal rate would do to your payment.
- Pass the stress test. Federally regulated lenders qualify you at the higher of 5.25% or your contract rate plus 2 percentage points. Run the calculator at that rate to see the payment they will test.
- Choose accelerated payments if your budget allows. It is one of the simplest ways to become mortgage-free sooner.
- Use prepayment privileges. Many closed mortgages let you prepay 10% to 20% of the original amount a year without penalty. Check your agreement.
- Budget for closing costs. Land transfer tax, legal fees, inspections and any PST on the premium are paid in cash on top of your down payment.
Common mistakes
- Using a US calculator. Monthly compounding overstates Canadian payments and ignores default insurance.
- Forgetting the premium. On a 5% down purchase, a 4.00% premium is added to the loan, and you pay interest on it for the whole amortization.
- Confusing bi-weekly with accelerated bi-weekly. Only the accelerated version speeds up repayment noticeably.
- Treating the 25-year interest as certain. Rates change at every renewal, so lifetime interest is an estimate.
For a US home purchase, use the mortgage calculator, and for the UK, the UK mortgage calculator. To see how far your income stretches, try the house affordability calculator. Results are estimates; your lender’s mortgage commitment shows the exact figures.