1. What is the Monthly Payment Formula?

The monthly payment formula calculates the fixed payment amount required each month to fully repay a home loan over its term, including interest. This is the standard calculation used by Canadian lenders in Ontario.

2. How Does the Calculator Work?

The calculator uses the PMT formula:

Where:

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

Details: Understanding your exact monthly payment helps with budgeting, comparing loan offers, and determining affordability when purchasing a home in Ontario.

4. Using the Calculator

Tips: Enter the principal amount in CAD, annual interest rate as a percentage (without % sign), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include property taxes and insurance?
A: No, this calculates only principal and interest. Ontario homeowners should budget separately for property taxes and insurance.

Q2: What's a typical mortgage rate in Ontario?
A: Rates vary, but as of 2023, fixed rates typically range from 4% to 6% for conventional mortgages.

Q3: How does amortization affect payments?
A: Longer amortization periods (e.g., 30 years) reduce monthly payments but increase total interest paid over the life of the loan.

Q4: Are there prepayment penalties in Ontario?
A: Many mortgages allow some prepayment without penalty, but terms vary. Check your mortgage agreement.

Q5: What's the difference between fixed and variable rates?
A: Fixed rates remain constant, while variable rates change with the prime rate. Variable rates often start lower but carry more uncertainty.