How the mortgage payment calculator works
The monthly payment on a fixed-rate mortgage depends on the loan amount, the interest rate, how many years it is spread over (the amortization), and how the rate compounds. In the US, mortgage rates compound monthly. In Canada, fixed-rate mortgages compound semi-annually, so the same quoted rate gives a slightly lower payment.
The formula
Payment = L × r ÷ (1 − (1 + r)−n), where L is the loan, n the number of monthly payments, and r the monthly rate:
- US (monthly compounding): r = annual rate ÷ 12
- Canada (semi-annual compounding): r = (1 + annual rate ÷ 2)1/6 − 1
Worked example
A $320,000 loan at 6% over 30 years costs $1,918.56 a month with US monthly compounding, and $1,903.43 with Canadian semi-annual compounding.
What to watch
- The payment here is principal and interest only. Property tax, insurance and any mortgage insurance come on top.
- Investment properties usually need a larger down payment and carry a higher rate than a home you live in.