Canadian Mortgage Calculator Formula & How It Works
Effective Monthly Rate = (1 + Annual Rate/2)^(1/6) − 1
- Canadian law mandates semi-annual compounding (not monthly)
- CMHC insurance required if down payment < 20% (premium: 2.8–4%)
- Minimum down payment: 5% (< $500K), 10% on portion $500K–$999K
- Amortization limit: 25 years (insured), 30 years (conventional)
Canada uniquely requires mortgage interest to compound semi-annually rather than monthly. This means the monthly rate is (1 + annual rate/2)^(1/6) − 1 rather than annual rate/12. This slightly lowers payments compared to monthly compounding at the same stated rate.