1. What is Loan Amortization?

Loan amortization is the process of paying off a debt over time through regular payments. In Ontario, Canada, this typically involves fixed monthly payments that cover both principal and interest.

2. How Does the Calculator Work?

The calculator uses the standard loan amortization formula:

Where:

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

Explanation: The formula calculates the fixed monthly payment required to pay off the loan over the specified term, accounting for compound interest.

3. Importance of Loan Calculation

Details: Understanding your monthly payment helps with budgeting and financial planning. In Ontario, mortgage stress tests require borrowers to qualify at higher rates than their actual rate.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Are Ontario mortgage rates different from other provinces?
A: Rates are generally similar across Canada, but Ontario may have specific regulations and insurance requirements.

Q2: What is a typical mortgage term in Ontario?
A: Most common terms are 5 years, though terms range from 1-10 years in Canada.

Q3: Does this include property taxes and insurance?
A: No, this calculates principal and interest only. Ontario homeowners must budget separately for taxes and insurance.

Q4: How does the mortgage stress test affect payments?
A: Since 2018, Canadian borrowers must qualify at the higher of their contract rate + 2% or the Bank of Canada's qualifying rate.

Q5: Are there prepayment options in Ontario?
A: Most Ontario mortgages allow annual prepayments of 10-20% of the original principal without penalty.