Loan Calculator Canada With Amortization

Loan Payment Formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Monthly Payment:

Total Interest:

Total Cost:

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1. What is the Loan Payment Formula?

The loan payment formula calculates the fixed monthly payment required to fully repay a loan over its term, including both principal and interest. This is the standard calculation used by Canadian banks for mortgages and loans.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Where:

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

Explanation: The formula accounts for compound interest over the life of the loan, calculating a fixed payment that will pay off both principal and interest by the end of the term.

3. Importance of Loan Amortization

Details: Amortization shows how each payment is split between principal and interest. Early payments are mostly interest, while later payments apply more to principal. Understanding this helps with financial planning and assessing prepayment options.

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. The calculator will show your monthly payment, total interest, and an amortization schedule.

5. Frequently Asked Questions (FAQ)

Q1: How accurate is this calculator for Canadian mortgages?
A: This uses the standard Canadian mortgage calculation. Some lenders may use slightly different rounding methods, but the results will be very close.

Q2: Are property taxes included in this calculation?
A: No, this calculates only principal and interest. Canadian mortgages often have additional costs like property taxes and insurance.

Q3: How does compounding frequency affect the calculation?
A: Canadian mortgages typically compound semi-annually, but payments are monthly. The calculator accounts for this standard Canadian practice.

Q4: What if I want to make accelerated payments?
A: Accelerated payments (weekly or bi-weekly) can reduce total interest. You would need to adjust the calculation accordingly.

Q5: How accurate is the amortization schedule?
A: The schedule shows the theoretical breakdown. Actual payments may vary slightly due to rounding by your lender.