Mortgage Payment Calculator

A mortgage payment is the fixed amount that repays your loan, with interest, over the amortization. It is worked out with the standard formula: payment = loan × i ÷ (1 − (1 + i)^−N), where i is the interest rate per payment and N is the number of payments. The one Canadian twist is that fixed-rate mortgages must state interest with semi-annual compounding, so the rate per month is (1 + rate ÷ 2)^(1/6) − 1, a little less than the quoted rate divided by 12. Variable-rate mortgages usually compound monthly.

The same mortgage costs different amounts depending on how often you pay. Accelerated payments pay it off years sooner.

• Amortization: how long it would take to pay off the whole mortgage. 25 years is the most common, and a shorter one means a higher payment but much less interest.
• Term: how long your rate and agreement last, often 1 to 5 years. At the end you renew, and the new rate can be higher or lower.
• In the early years most of each payment is interest, so the balance falls slowly at first. The balance chart shows this.

If your down payment is under 20% of the price, your mortgage must be insured. The one-time premium is a percentage of the loan and depends on your loan-to-value ratio (CMHC rates for owner-occupied homes).

• Minimum down payment: 5% of the first $500,000, plus 10% of the part from $500,000 to $1.5 million.
• Homes of $1.5 million or more need at least 20% down, and insured mortgages are only for homes under $1.5 million.
• An amortization over 25 years carries an extra 0.20% premium and is only available in some cases, for example some first-time buyers and new builds. Ask your lender.
• Premiums in Ontario, Quebec and Saskatchewan also have provincial sales tax, which is paid at closing and not added to the mortgage.
• Insured mortgages must pass the stress test: you qualify at the higher of your rate plus 2% or 5.25%.

Choose your country at the top of the calculator and it switches to that country's rules. Outside Canada the interest is charged monthly on the balance, so the payment is the standard formula: payment = loan × i ÷ (1 − (1 + i)^−N), with i the monthly rate and N the number of months.

A longer amortization lowers the payment but adds a lot of interest. Here is the same $500,000 at 5% fixed, paid monthly, over four amortizations.

On the $500,000, 25-year example the first monthly payment of $2,908.02 is about $2,061.96 interest and only $846.07 principal. After 5 years of payments you would still owe about $442,538, so you will have repaid roughly $57,000 of the loan. This is why the balance falls slowly at first and why extra payments early in the mortgage save the most.

Most Canadian lenders let you prepay part of the mortgage each year without a penalty. Every extra dollar goes straight to the principal, so it stops earning interest. Adding a fixed amount to every monthly payment on the same example:

On a $500,000 fixed mortgage over 25 years, 4% gives a monthly payment of $2,630.10, 5% gives $2,908.02 and 6% gives $3,199.03. One percentage point is about $280 to $290 a month. Keep this in mind at renewal, when your rate can change and your payment is recalculated on the balance that is left.

• Compare the total interest, not only the payment.
• Accelerated bi-weekly payments are an easy way to pay down the mortgage sooner.
• Ask your lender about prepayment privileges, penalties and what happens at renewal.
• Remember other costs: property tax, home insurance, heating, condo fees, closing costs and land transfer tax.

For a fixed rate with semi-annual compounding and monthly payments, use =PMT((1+rate/2)^(1/6)-1, years*12, -loan), with the yearly rate in a cell such as 5%. For monthly compounding use =PMT(rate/12, years*12, -loan).