How are Canadian mortgage payments calculated?

Canadian fixed-rate mortgages compound interest semi-annually, not monthly, by law. The annual rate is converted to an effective monthly rate using that semi-annual basis, then the standard amortising formula gives the payment. This makes Canadian payments slightly lower than a monthly-compounded equivalent.

When is CMHC insurance required?

Mortgage default insurance (CMHC, Sagen or Canada Guaranty) is mandatory when your down payment is less than 20% of the price. The premium is a percentage of the loan — roughly 2.8% to 4.0% depending on the loan-to-value ratio — and is usually added to the mortgage balance.

What is the mortgage stress test?

Federally regulated lenders must qualify you at the greater of your contract rate plus 2% or the 5.25% benchmark. You must be able to afford the payment at that higher rate, even though you pay at the lower contract rate. This calculator shows both payments.

What is the minimum down payment in Canada?

5% on the first CAD 500,000 of price and 10% on the portion above CAD 500,000, for homes up to CAD 1 million. Homes of CAD 1 million or more require at least 20% down and cannot be insured.

Does this calculator store my data?

No. All figures are computed locally in your browser and nothing is uploaded, so your details stay private.

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This Canada mortgage calculator models a Canadian home loan the way a Canadian lender does: semi-annual compounding, compulsory CMHC default insurance when you put down less than 20%, and the federal mortgage stress test.

How it works

Canadian fixed-rate mortgages are, by law, compounded semi-annually. The effective monthly rate is:

i = (1 + annualRate/2)^(1/6) − 1

That monthly rate feeds the standard amortising formula M = P·i(1+i)ⁿ / ((1+i)ⁿ−1), where n is the amortisation in months.

If your down payment is under 20%, default insurance is added. The premium is a percentage of the loan that rises as the loan-to-value ratio rises (around 2.8% at 80-85% LTV up to about 4.0% at 90-95% LTV) and is normally added to the mortgage balance.

Finally, the stress test recomputes the payment at the greater of contract rate + 2% or 5.25%. You must be able to afford that higher payment to qualify.

Example

A CAD 600,000 home with 10% down (CAD 60,000) leaves a CAD 540,000 loan at 90% LTV, so a 3.10% CMHC premium adds about CAD 16,740, making the insured loan roughly CAD 556,740. At a 5% contract rate over 25 years, the payment is about CAD 3,240/month. At the 7% stress-test rate it rises to about CAD 3,910/month — the figure you must qualify against.

Notes

This is an estimate. Provincial sales tax on the insurance premium, property tax, and condo fees are excluded. Insured-mortgage rules cap amortisation at 25-30 years depending on the buyer. Always confirm with a mortgage broker or lender.