Mortgage Payment Calculator Canada

Down Payment

The down payment is the amount you will pay upfront to obtain a mortgage.

What’s my minimum down payment?

Your minimum down payment depends on the purchase price of your property.

• If your purchase price is under $500,000, your minimum down payment is 5% of the purchase price.
• If your purchase price is $500,000 to $999,999, your minimum down payment is 5% of the first $500,000, plus 10% of the remaining portion.
• If your purchase price is $1,000,000 or more, your minimum down payment is 20% of the purchase price.

If you’re self-employed or have poor credit, your lender may require a higher down payment.

Are there additional costs or restrictions associated with small down payments?

Yes. If your down payment is below 20% of the purchase price,

• you will be required to purchase mortgage default insurance, and so
• your amortization period cannot exceed 25 years.

For more information, see the section on CMHC insurance below.

Amortization

The amortization period is the total length of time over which you plan to pay off your mortgage.

What amortization period should I choose?

While we cannot give advice for your specific situation, here are some general guidelines:

• The most common amortization period in Canada is 25 years. Unless you have specific concerns, a 25 year amortization works well in most cases.
• Choosing a shorter amortization period will lower your lifetime interest cost, but will result in a higher monthly or bi-weekly payment.
• If you choose an amortization period of over 25 years, you must make at least 20% down payment. See the section on CMHC insurance below.

Term

The term of your mortgage is the length of time for which you sign a legal agreement with your lender. For the length of the term, you are obligated to their conditions and penalties.

What term should I choose?

The most common term length in Canada is 5 years. Unless you have specific concerns, a 5-year term generally works well. Each lender will offer different options for term length and rates; contact your lender for more details.

For professional help with determining which term is right for you, please contact our professional mortgage broker.

What happens at the end of a term?

At the end of each term, you have the option to renew or refinance your mortgage.

• Renewing your mortgage involves signing for another term with your existing lender. Your monthly payment and interest rate may change.
• Refinancing your mortgage involves signing a new term agreement, possibly with a different rate or lender. Refinancing allows you to take advantage of lower rates or better options not offered by your current lender.

Interest Rates

The interest rate determines how much interest is added to the unpaid portion of your mortgage loan.

How does the interest rate affect the cost of my mortgage?

A higher interest rate can significantly increase your monthly or bi-weekly payment, as well as inflate the term and lifetime cost of your mortgage. Conversely, a lower interest rate can save you tens of thousands of dollars over time.

What’s the difference between a fixed and variable rate?

• A fixed interest rate is guaranteed to remain unchanged for the length of your mortgage term.
• A variable interest rate can change during your mortgage term. This will not affect your mortgage payment for the duration of the term, but adjusts what percentage of your payment goes to paying off the mortgage principal.

What controls a variable interest rate?

Your variable interest rate is directly controlled by your lender via their prime rate. Each lender can choose to increase or decrease their own prime rate, in turn increasing or decreasing your variable interest rate.

Lenders will usually adjust their prime rate to reflect changes in the Bank of Canada’s Policy Interest Rate. This means that lenders will tend to have similar or identical prime rates. All major Canadian banks currently have a prime rate of 3.95%.

Should I choose a fixed or variable rate?

Variable rates allow you to take advantage of future decreases in interest rate. On the other hand, fixed rates are preferable if interest rates rise in the future. Unfortunately, long-term fluctuations in the prime rate are difficult if not impossible to predict.

However, a 2001 study found that between 1950–2000, choosing a variable interest rate resulted in lower lifetime mortgage cost than a fixed rate up to 90% of the time. According to the study, if you are comfortable with the risks involved, a variable rate may reduce your long-term mortgage cost.

For professional help with determining which rate is right for you, please contact our professional mortgage broker.

Payment Frequency

The payment frequency determines how often you will make mortgage payments.

What’s the difference between monthly and bi-weekly payment frequency?

• A monthly mortgage payment is made once per month (12 times per year).
• A bi-weekly payment is made once every two weeks (26 times per year).

Which payment schedule is right for me?

While we cannot give advice for your specific situation, here are some general guidelines:

• Most people choose to synchronize their mortgage payments with their monthly or bi-weekly paycheck.
• Choosing a bi-weekly payment schedule will slightly lower your term and lifetime mortgage cost.

CMHC Insurance

Mortgage default insurance, also known as Canada Mortgage and Housing Corporation (CMHC) Insurance, protects your mortgage lender in the case of default.

Do I need CMHC insurance?

Under Office of the Superintendent of Financial Institutions (OSFI) regulations, you are required to purchase CMHC insurance if your down payment is below 20%.

You may be ineligible for CMHC insurance if:

• your purchase price is $1,000,000 or above, or
• your amortization period is longer than 25 years.

In these cases, you must make a down payment of 20% or higher.

How much does CMHC insurance cost?

Your CMHC insurance cost is calculated as a percentage of your purchase price. The exact percentage depends on your down payment amount, and decreases for larger down payments.

Since March 17, 2017, the following CMHC premiums apply in most situations:

How do I pay for CMHC insurance?

Your lender is actually the party responsible for paying CMHC insurance costs. In the majority of cases, your lender will pass these costs down to you by adding the CMHC insurance premium to your mortgage loan amount. This will slightly increase your monthly or bi-weekly payment.

In some cases, your lender may allow you to pay CMHC insurance costs as a lump-sum, or not pass down the cost to you at all. Contact your lender for more details.

What is a high-ratio mortgage?

A mortgage with a down payment below 20% is known as a high-ratio mortgage. The term ratio refers to the size of your mortgage loan amount as a percentage of your total purchase price.

All high-ratio mortgages require the purchase of CMHC insurance, since they generally carry a higher risk of default.