1. What is the Government of Canada Amortization Formula?

The Government of Canada uses standard amortization formulas to calculate loan payments. This calculator helps determine monthly payments, total payment, and total interest for loans based on principal amount, interest rate, and term.

2. How Does the Calculator Work?

The calculator uses the amortization formula:

Where:

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

Explanation: The formula calculates the fixed monthly payment required to fully repay a loan over its term, including both principal and interest.

3. Importance of Loan Amortization

Details: Understanding loan amortization helps borrowers plan their finances, compare loan options, and understand how much interest they'll pay over the life of the loan.

4. Using the Calculator

Tips: Enter the principal amount in CAD, annual interest rate as a percentage, and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What types of loans does this calculator work for?
A: This works for standard fixed-rate loans including mortgages, personal loans, and car loans offered by Canadian financial institutions.

Q2: Does this include insurance or taxes?
A: No, this calculates only the principal and interest portion of payments. Additional costs like mortgage insurance or property taxes are not included.

Q3: How does compounding frequency affect the calculation?
A: This calculator assumes monthly compounding, which is standard for most Canadian loans.

Q4: What's the difference between amortization and term?
A: Amortization is the total time to pay off the loan, while term is the length of your current contract (before renewal at new rates).

Q5: Are there prepayment options in Canada?
A: Most Canadian loans allow some prepayment (typically 10-20% annually) without penalty, but this varies by lender.