1. What is a CRA Mortgage Calculator?

Definition: This calculator computes monthly mortgage payments using Canada Revenue Agency's approved calculation method for tax purposes.

Purpose: Helps Canadian homeowners estimate mortgage payments and understand their tax-deductible interest components.

2. How Does the Calculator Work?

The calculator uses the Canadian mortgage formula:

Where:

• \( M \) — Monthly payment (CAD)
• \( P \) — Loan principal (CAD)
• \( r \) — Effective monthly interest rate
• \( n \) — Total number of payments (months)

The effective monthly rate is calculated as: \[ r = (1 + \frac{i}{2})^{\frac{1}{6}} - 1 \] where \( i \) is the annual interest rate.

3. Importance of CRA-Approved Calculation

Details: Canadian mortgages use semi-annual compounding by law, making this calculation different from standard mortgage formulas.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Why is Canadian mortgage calculation different?
A: Canadian law requires interest to be compounded semi-annually, not in advance, creating a unique calculation method.

Q2: Does this include property taxes or insurance?
A: No, this calculates only the principal and interest portion of your payment.

Q3: How accurate is this for tax purposes?
A: This uses the CRA-approved method for calculating mortgage interest for tax deductions.

Q4: What's the difference between amortization and term?
A: Amortization is the total repayment period (e.g., 25 years), while term is the current contract length (e.g., 5 years).

Q5: Can I calculate bi-weekly payments?
A: For bi-weekly, divide the monthly rate by 2 and adjust the number of payments accordingly.