Mortgage payment methodology

Last verified: 2026-07-06 · Effective for Canadian mortgages, 2026 · by Fiscal Moose

The Mortgage Payment calculator works out the periodic payment, total interest, and amortization schedule for a Canadian residential mortgage, plus the CMHC insurance premium owed when the down payment is below 20%. This page documents the rules and conventions the calculator relies on, the sources we verify them against, the reference cases that authorise the formula to ship, and the known limitations of our model. For the affordability side (the stress test and debt-service ratios), see our mortgage affordability calculator; for registered accounts, the RRSP calculator has its own methodology page.

How the calculator works

The calculator computes four things, all from the versioned constants in our data file and the conventions in the Interest Act and the CMHC schedule:

• The periodic payment (semi-annual compounding). By the Interest Act, interest on a Canadian fixed-rate mortgage is compounded no more than twice a year, not monthly. We convert the stated annual rate to an effective per-period rate as (1 + annual ÷ 2)^2/p − 1, where p is the number of payments per year, NOT the naive annual ÷ p that non-Canadian calculators use. On a $400,000 mortgage at 5% over 25 years this gives a monthly payment of $2,326.42, about $15/month below the monthly-compounding figure. The payment is then the standard amortizing-loan annuity at that per-period rate.
• The six payment frequencies. Monthly (12/yr), semi-monthly (24), bi-weekly (26), and weekly (52) each amortize over the full term. The two accelerated frequencies pay more principal: accelerated bi-weekly is the monthly payment ÷ 2 paid 26 times a year (about one extra monthly payment annually), and accelerated weekly is the monthly payment ÷ 4 paid 52 times. Both shorten the amortization; the calculator reports the effective amortization and the months saved.
• CMHC insurance and capitalization. A down payment under 20% requires mortgage default insurance. The premium is a percentage of the base loan that rises as the down payment shrinks (the tiers below), selected on the base-loan loan-to-value (never the insured loan), and it is added to (capitalized onto) the mortgage principal and amortized over the term. An amortization over 25 years adds a 0.20% surcharge. Homes priced at $1.5 million or more need at least 20% down and cannot be insured at all; a 30-year insured amortization is limited to first-time buyers and newly built homes.
• The minimum down payment. 5% on the portion of the price up to $500,000, 10% on the portion from $500,000 to $1.5 million, and 20% on homes priced at $1.5 million or more. For an $800,000 home that is $55,000. The calculator computes this for the entered price and flags a below-minimum down payment.

Current constants (2026)

These values are read directly from our versioned data files (packages/data/src/mortgage/limits.ts). The full CMHC premium-by-LTV table and the worked minimum-down-payment example are rendered on the calculator page itself.

Reference cases and verification

The mortgage formula ships only after passing a suite of 36 reference cases, each a known scenario with a known expected output: payment amounts at every frequency, CMHC premium tiers, the minimum-down-payment bands, and the not-advanceable edge cases. The build fails if any case diverges from its expected value beyond the case’s tolerance. The amortization schedule also has its own independent closed-form verifier (scripts/verify-mortgage-amortization-cases.ts) that recomputes the payoff on a separate code path, so a schedule error cannot pass both checks.

The marquee anchor is the standard $400,000 / 5% / 25-year monthly mortgage at $2,326.42 per month, the figure that exposes whether a calculator applies the Canadian semi-annual convention or the wrong monthly one.

Our update cadence

The semi-annual compounding convention and the payment-frequency definitions are statutory and structural; they change only by amendment to the Interest Act. The CMHC premium tiers, the minimum-down-payment bands, and the $1.5 million insurable cap are CMHC / federal policy, which we monitor and refresh on an as-needed basis when CMHC publishes a change. The Bank of Canada policy-rate default is refreshed on the Bank’s announcement schedule, but it is only a convenience pre-fill, not a figure the methodology depends on.

If you find an error

If you spot a mistake in the calculator or this page, report it through our contact page. We commit to acknowledging within 24 hours, fixing clear formula or data errors within 7 days, and publishing a changelog entry describing what changed and when.

Professional-review status

This page is operator-verified against CMHC, the Interest Act, and the Financial Consumer Agency of Canada; it is not professional financial advice and has not been CPA- or broker-reviewed. The CMHC premium schedule and minimum-down-payment thresholds were re-confirmed verbatim against the live source pages on 2026-07-06.

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