WealthMortgage Calculator (Payment + Amortization)
Mortgage calculator
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For informational purposes only. Does not constitute financial advice. Consult your financial institution for the exact terms of your loan.
How mortgage math works
A mortgage is a fixed-payment (annuity) loan: every monthly payment is identical, but its composition shifts over time. Early on, most of each payment covers interest on the large remaining balance. As the balance falls, the interest portion shrinks and more of each payment reduces principal — that is the amortization effect.
The monthly payment formula is:
M = P × c / (1 − (1 + c)^(−N))
where P is the loan amount, c = annual rate / 100 / 12 is the monthly rate, and N = years × 12 is the total number of payments. If the rate is zero (c = 0), then M = P / N. Each month: interest for the month = balance × c; principal repaid = M − interest; new balance = balance − principal repaid.
The effect of extra payments
Every extra dollar goes straight to reducing principal. The effect cascades: next month, interest is charged on a lower balance, so more of your regular payment reduces principal, and so on. Even a modest monthly prepayment can shorten a 25-year mortgage by several years and save tens of thousands of dollars in interest — the calculator shows you exactly how much.
Worked example
Take a $400,000 loan at 5.5% over 25 years. The monthly payment is roughly $2,452. Over 25 years you will pay about $335,600 in interest — nearly as much as the original loan. With an extra $300/month, the mortgage pays off in about 20 years and you save roughly $90,000 in interest. That is the power of accelerated amortization.
Fixed rate, variable rate, and terms in Canada
In Canada, a mortgage is negotiated in terms (typically 1 to 5 years) rather than for the full amortization period. At each renewal the rate is renegotiated. A fixed rate locks in the same payment for the term; a variable rate moves with the Bank of Canada policy rate. This calculator assumes a constant rate over the full amortization, making it a planning tool, not a loan offer.
Frequently Asked Questions
How is a mortgage monthly payment calculated?
The monthly payment M is calculated with the formula: M = P × c / (1 − (1 + c)^(−N)), where P is the loan amount, c = annual rate / 12 is the monthly rate, and N = years × 12 is the total number of payments. Each payment first covers the interest accrued on the remaining balance, then reduces the principal.
What is the difference between a nominal rate and the effective rate in Canada?
Under Canadian law, mortgage rates must be quoted with semi-annual compounding (twice a year). To convert to a true monthly rate, use: c = (1 + rate/2)^(1/6) − 1. This calculator uses simple monthly compounding (rate/12) for illustration; check with your lender for the exact effective rate on your product.
What happens if I make extra payments on my mortgage?
Every extra dollar goes directly to reducing the principal. This creates a cascade effect: next month, interest is charged on a lower balance, so more of your regular payment reduces principal, and so on. Even a modest monthly prepayment can shorten your mortgage by several years and save tens of thousands of dollars in interest.
What is the maximum amortization period in Canada in 2026?
Since August 2024, the maximum amortization is 30 years for first-time buyers or new construction with CMHC-insured mortgages, and 25 years for other insured mortgages. For uninsured mortgages (20% or more down payment), some lenders offer up to 30 years. These rules may change — verify with your lender. The figures from this calculator are provided for informational purposes only.
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