Mortgage Parameters
Payment Frequency & Additional Expenses
Monthly payment (Principal & Interest)
Understanding Canadian Mortgage Calculations
In Canada, mortgage interest on fixed-rate residential mortgages is governed by the federal Interest Act, which requires that quoted annual interest rates be compounded semi-annually, not in advance. This differs from US mortgage calculators that divide the nominal rate by 12.
Semi-Annual Compounding
The annual interest rate is converted to an effective monthly rate using (1 + rate/2)^(2/12) - 1, resulting in an exact monthly payment of $2,213.89 on a $400k balance at 4.50%.
CMHC Default Insurance
When purchasing with less than 20% down, default mortgage insurance (CMHC, Sagen, Canada Guaranty) is mandatory and tiered between 2.80% and 4.00% of the loan principal.
Accelerated Payments
Accelerated bi-weekly payments divide the monthly payment by 2 and collect it 26 times per year, effectively making one extra full monthly payment each year toward principal.