Mortgage payment calculator

• The rate holds for the whole amortization. A real mortgage is fixed for a term of a few years and then renews at whatever rate applies then, so the interest total here is a projection, not a promise.
• Canada: the quoted rate is converted through semi annual compounding, as section 6 of the Interest Act requires. The United States: the quoted rate is divided by the number of payments in a year.
• Canada: below 20 percent down, the CMHC premium is charged on the loan and added to it, which is the usual arrangement. Provincial sales tax on that premium is payable in Ontario, Quebec, Manitoba and Saskatchewan, cannot be added to the loan, and is not included here.
• The United States: the calculator flags private mortgage insurance below 20 percent down. It only puts a figure on it when you enter the annual rate your lender quotes, because that rate depends on your credit and on the loan.
• Property tax, home insurance, condo fees and utilities are not in the payment. Lenders collect some of these alongside the mortgage, so the amount leaving your account is usually higher.
• The qualifying rate is yours to enter. OSFI sets the rule for uninsured mortgages at a federally regulated lender and republishes the rate, so nothing is assumed for you here.

A mortgage payment is a level annuity. The lender works out the amount that clears the balance over the amortization at the quoted rate, and you pay the same figure every period. Early on, most of it is interest, because interest is charged on a balance that has barely moved. The split shifts toward principal as the balance falls, which is why the last years of a mortgage repay far more capital than the first.

Where the two countries part company is the compounding rule. Canadian law requires a fixed rate mortgage to state a rate compounded no more than twice a year, so a quoted 4.5 percent is converted to a monthly rate through the semi annual figure rather than by dividing by twelve. That makes the Canadian payment slightly lower than the American payment on the same headline rate. American mortgages compound monthly, so the division is the simple one.

Insurance is the other split. Canada requires mortgage loan insurance below 20 percent down, priced from a published CMHC table by loan to value and added to the amount you finance, which means you pay interest on the premium too. The American equivalent is private mortgage insurance, charged monthly by the lender rather than capitalised, and it falls away once equity reaches the level the rules set.

Paying more often than monthly shortens the amortization a little, because the balance drops sooner and less interest accrues between payments. Switching to a weekly or two weekly schedule that keeps the same annual total has a smaller effect than an accelerated schedule, which quietly adds an extra month of payments a year.