Canadian Mortgage Calculator

Canadian mortgages compound semi-annually by convention even though payments are monthly — enter a loan amount, rate, and amortization period to see the payment that produces, along with the true effective annual rate.

How to Use the Canadian Mortgage Calculator

Loan amount, annual rate, and amortization period — the Canadian term for what a US calculator would call the loan term — are the only three fields. The compounding adjustment described below happens automatically; there's nothing to toggle.

Quote the same 5.5% rate on a mortgage in Toronto and one in Texas, and the two loans don't actually cost the same. Canadian mortgages compound semi-annually, by federal convention, even though payments are collected monthly — a rule with no real equivalent in US mortgage lending, where the compounding period simply matches the monthly payment schedule.

Semi-Annual Rate = Annual Rate ÷ 2
Effective Monthly Rate = (1 + Semi-Annual Rate)^(2/12) − 1

That effective monthly rate — not the nominal annual rate divided by twelve — is what actually goes into the payment formula:

M = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ − 1]

P is the loan amount, r the effective monthly rate above, n the number of monthly payments over the amortization period. Run a US-style calculator with the nominal rate divided by twelve and you'll get a slightly lower payment than a real Canadian lender would actually charge on the identical stated rate.

The gap becomes clearer as an annual figure. Converting the semi-annual compounding into its true yearly cost gives the effective annual rate:

EAR = (1 + Semi-Annual Rate)² − 1

A 5.5% nominal rate works out to roughly 5.58% once compounding is accounted for — not a huge gap, but a real one, and it has nothing to do with fees, insurance, or anything a lender is adding on. It's a pure consequence of compounding twice a year instead of twelve times, which is why the EAR is worth glancing at even when you're not shopping between lenders — it's the honest answer to "what am I actually paying," next to the nominal rate lenders lead with.