1. What is a Canadian Mortgage Calculator?

Definition: This calculator estimates monthly mortgage payments in Canada using the standard Canadian mortgage formula which accounts for semi-annual compounding.

Purpose: It helps home buyers and homeowners understand their potential mortgage payments based on loan amount, interest rate, and amortization period.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

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

The effective monthly rate is calculated using:

Where \( i \) is the annual interest rate (decimal)

3. Importance of Mortgage Calculation

Details: Accurate mortgage calculations help borrowers understand their financial commitments, compare loan options, and budget effectively.

4. Using the Calculator

Tips: Enter the loan amount in CAD, annual interest rate (default 5%), and amortization period in years (default 25). All values must be > 0.

5. Frequently Asked Questions (FAQ)

Q1: Why is the Canadian formula different?
A: Canadian mortgages use semi-annual compounding by law, requiring a special calculation method.

Q2: What's included in the monthly payment?
A: This calculates principal and interest only. Taxes and insurance would be additional.

Q3: How does amortization affect payments?
A: Longer amortization reduces monthly payments but increases total interest paid.

Q4: What's a typical Canadian mortgage term?
A: While amortization is often 25-30 years, mortgage terms are typically 1-5 years before renewal.

Q5: Does this account for variable rates?
A: This calculates payments based on the current rate. Variable rates would change over time.