Canada Mortgage Calculator

Canadian mortgages typically have 5-year terms (the rate is fixed for 5 years, then renegotiated) within a 25-30 year amortisation. Compare to US 30-year fixed where the rate is locked for the full life. After the 5-year term, you renew at whatever rate is current - if rates have spiked, your payment can jump significantly.

Most Canadian mortgages have prepayment limits (typically 15-20% of original principal per year without penalty). Breaking a fixed-rate mortgage early triggers a penalty - either 3 months interest (variable rate) or interest rate differential (IRD, often $5,000-30,000 on fixed-rate). This rigidity is a meaningful difference from the US system.

Down payments under 20% require mortgage default insurance (CMHC, Sagen, or Canada Guaranty). The premium is added to your loan: 4% extra on the loan amount at 5% down, 3.1% at 10% down, 2.8% at 15% down. So a $400k home with 5% down ($20k) actually borrows $396k principal becoming $411,840 with insurance premium added.

Insured mortgages get lower rates (typically 0.10-0.30% lower) because the default risk is covered by insurance. After your equity reaches 20%, the insurance premium is sunk cost - you keep paying it through the loan but no further premium accrues. Most first-time buyers in major Canadian markets pay insurance because home prices outpace their savings.

All federally-regulated lenders must qualify you at the higher of your contract rate + 2% or 5.25% (whichever is greater). At a 5.5% contract rate, you qualify at 7.5%. This stress test reduces what most buyers can afford by roughly 15-20% versus pure affordability at the contract rate. Provincial credit unions are sometimes exempt from federal stress test but apply their own.

GDS (Gross Debt Service) ratio: housing should be under 39% of gross income. TDS (Total Debt Service): all debt under 44%. These are insurer maximums - many lenders apply tighter rules. A $120k household income qualifies for housing payments around $3,900/month maximum, which translates to roughly a $560k home with 20% down at current rates.

Fixed rate locks in payment certainty for the term (usually 5 years). Variable rate fluctuates with the Bank of Canada policy rate. Historically, variable has won 70%+ of the time over 25-year horizons due to lower average rates. The 2022-2023 rate cycle hurt variable holders badly as BoC raised rates 4.5 percentage points.

A common modern strategy: variable for the first 5 years if you can stomach payment changes, fixed if you want predictability. The [Canada Income Tax Calculator](/canada-income-tax-calculator) helps model affordability against your actual after-tax income. Get pre-approved by a mortgage broker (multiple lender shopping in one application) before house-hunting.