Canadian Mortgage
Calculate Canadian mortgage payments with semi-annual compounding, CMHC insurance premiums, and amortization schedules specific to Canada
Formula
Payment with semi-annual compounding
Canadian mortgages use semi-annual compounding. CMHC insurance is added for down payments under 20%.
Worked Examples
Example 1: Calculate CMHC Premium
Problem:$600,000 home, 10% down payment.
Solution:Down payment: $60,000\nMortgage: $540,000\n\nCMHC rate at 10% down: 3.1%\nPremium: $540,000 × 0.031 = $16,740\n\nTotal mortgage: $556,740
Result:CMHC: $16,740
Example 2: Accelerated Bi-Weekly
Problem:$400,000 mortgage, 5%, 25-year amortization.
Solution:Monthly payment: ~$2,326\nAccelerated bi-weekly: $2,326 ÷ 2 = $1,163\n\n26 payments × $1,163 = $30,238/year\nvs 12 × $2,326 = $27,912/year\n\nPays off ~3 years early!
Result:Saves ~$20,000+ interest
Example 3: Stress Test
Problem:Qualify at 5% rate, what stress test rate?
Solution:Stress test rate = higher of:\n- Contract rate + 2% = 7%\n- Floor rate = 5.25%\n\nYou must qualify at 7%.\nThis reduces max affordability by ~20%.
Result:Must qualify at 7%
Frequently Asked Questions
How is a Canadian mortgage different from US?
Canadian mortgages use semi-annual compounding (not monthly), typically have 5-year terms (not 30-year fixed), and require CMHC insurance below 20% down. Rates are often lower due to different market structure.
Can I pay off my mortgage early?
Most mortgages allow 10-20% prepayment annually without penalty. Breaking a fixed-rate mortgage early can have significant penalties (IRD or 3 months interest).
What credit score do I need for the best mortgage rates?
A FICO score of 760 or higher typically qualifies you for the lowest advertised mortgage rates. Dropping from 760 to 700 can cost you 0.25-0.50% more in interest — on a $400,000 30-year loan, that difference costs roughly $60-$120 more per month and over $25,000 in extra interest. Scores between 620-699 still qualify for conventional loans but at noticeably higher rates. Scores below 580 generally require FHA loans, which accept down payments as low as 3.5% but mandate mortgage insurance for the life of the loan. Before applying, pay down revolving balances to below 30% of credit limits — this alone can boost your score 20-40 points.
How do mortgage points work?
Mortgage discount points are prepaid interest you pay at closing to permanently reduce your loan's interest rate. One point costs 1% of the loan amount — on a $350,000 mortgage, one point costs $3,500 — and typically lowers your rate by 0.20-0.25%. To determine whether buying points makes sense, calculate your break-even period: divide the upfront cost by your monthly savings. For example, $3,500 paid to save $55/month breaks even in about 64 months (5.3 years). If you plan to stay in the home beyond that point, buying points saves money. If you may sell or refinance sooner, keep the cash. Points are tax-deductible in the year of purchase for a primary residence.