1. What is the Canadian Mortgage Payment Formula?

The Canadian mortgage payment formula calculates the fixed monthly payment required to fully amortize a loan over its term. This is the standard calculation used by Canadian financial institutions like RBC, TD, and Scotiabank.

2. How Does the Calculator Work?

The calculator uses the mortgage payment formula:

Where:

• \( P \) — Principal loan amount (CAD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of monthly payments (term in years × 12)
• \( PMT \) — Monthly mortgage payment (CAD)

Explanation: The formula accounts for compound interest over the life of the loan, calculating a fixed payment that covers both principal and interest.

3. Importance of Mortgage Calculation

Details: Accurate mortgage calculations help borrowers understand their financial commitments, compare loan offers, and budget effectively for home ownership.

4. Using the Calculator

Tips: Enter the principal amount in CAD, annual interest rate (e.g., 4.79 for 4.79%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does this differ from U.S. mortgage calculations?
A: Canadian mortgages typically compound semi-annually by law, but this formula provides a close approximation for fixed-rate mortgages.

Q2: Does this include property taxes and insurance?
A: No, this calculates only principal and interest. Canadian lenders often require additional amounts for taxes and insurance.

Q3: What's a typical Canadian mortgage rate?
A: As of 2024, rates range from 4.5% to 6% for fixed-rate mortgages, varying by term length and lender.

Q4: How does amortization affect payments?
A: Longer amortization periods reduce monthly payments but increase total interest paid over the life of the loan.

Q5: Can this be used for variable rate mortgages?
A: This calculates payments for fixed rates only. Variable rate mortgages may have different payment structures.