Mortgage Pro Calculator

Section 6 of the federal Interest Act requires that for any mortgage with an original term over 5 years, the interest rate must be expressed as if compounded semi-annually or annually, not in advance, unless a lower effective rate results. In practice, virtually all Canadian fixed-rate mortgages use semi-annual compounding, which produces a slightly lower effective monthly rate than the monthly compounding used in the United States.

CMHC (or private insurers Sagen and Canada Guaranty) insurance is mandatory whenever a down payment is less than 20% of the purchase price, on homes priced under $1.5 million. The premium ranges from about 0.60% of the mortgage at a 65% loan-to-value up to 4.00% at a 95% loan-to-value, and is usually added to the mortgage principal. Ontario, Quebec and Saskatchewan also charge provincial sales tax on the premium itself, payable in cash at closing.

Federally regulated lenders must confirm you can still afford your payments at a higher "minimum qualifying rate", equal to whichever is greater: your contract rate plus 2 percentage points, or the OSFI benchmark floor of 5.25%. This applies to both insured and uninsured mortgages at purchase or refinance, though most lenders don't re-apply the stress test at renewal if you stay with the same lender.

Gross Debt Service (GDS) is the share of your gross household income spent on mortgage payments, property tax, heat and half of any condo fees; lenders typically cap it around 39%. Total Debt Service (TDS) adds all other debt payments, such as car loans and credit cards, and is typically capped around 44%. Both ratios use the stress-test qualifying rate, not your actual contract rate.

Ontario charges a marginal provincial land transfer tax from 0.5% up to 2.5% of the purchase price. Buyers in the City of Toronto pay a near-identical municipal land transfer tax on top of the provincial tax. Eligible first-time buyers can receive a rebate of up to $4,000 provincially and up to $4,475 from Toronto, for a combined maximum of $8,475.

Breaking a variable-rate mortgage typically costs three months of interest on the outstanding balance. Breaking a fixed-rate mortgage costs the greater of three months' interest or the interest rate differential (IRD), which estimates the lender's lost revenue between your contract rate and the current rate for a comparable remaining term. The IRD is usually the larger — and more expensive — of the two when rates have fallen since you signed.

Most Canadian lenders allow prepayment privileges of 10% to 20% of the original principal per calendar year, combining lump-sum payments and any permanent increase to your regular payment amount, without triggering a penalty. Privileges vary by lender and product and typically don't carry over to the following year if unused.

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