Minimum down payment in Canada
- $500,000 or less: 5% of the price.
- $500,000 to $1.5 million: 5% of the first $500,000 plus 10% of the rest. On $700,000 that's $25,000 + $20,000 = $45,000.
- $1.5 million or more: 20% of the price, and the mortgage can't be insured.
Mortgage default insurance (CMHC)
With less than 20% down, the mortgage must be insured by CMHC, Sagen or Canada Guaranty. The premium is a percentage of the loan, based on how much you put down, and is normally added to the mortgage rather than paid up front.
- 5% to 9.99% down: 4.00% of the loan
- 10% to 14.99% down: 3.10%
- 15% to 19.99% down: 2.80%
- 20% or more: no insurance required
- 30-year amortization: add 0.20%. Insured 30-year mortgages are available to first-time buyers and buyers of newly built homes.
- In Ontario, Quebec and Saskatchewan, provincial sales tax on the premium is due in cash at closing.
Why Canadian mortgages compound semi-annually
Under the federal Interest Act, fixed-rate mortgages in Canada are quoted with interest compounded semi-annually, not monthly. A 5% rate compounded twice a year works out to about 0.4124% a month, slightly less than the 0.4167% a US-style calculator would use. On a $500,000 loan over 25 years, the payment is about $2,908 a month instead of about $2,923.
Variable-rate mortgages are often compounded monthly; check your mortgage agreement.
Payment frequency and accelerated payments
Regular bi-weekly and weekly payments cost about the same over a year as monthly ones. Accelerated payments are different: accelerated bi-weekly takes your monthly payment, halves it and charges that every two weeks. With 26 payments a year, you pay the equivalent of 13 monthly payments instead of 12, and the extra goes straight to principal.
On a typical 25-year mortgage, that takes three or more years off the amortization and saves tens of thousands in interest.
Term vs amortization
The amortization is how long the whole mortgage takes to pay off, usually 25 years. The term is how long your current rate and contract last, most often 5 years. At the end of each term you renew, possibly at a different rate, so this calculator's total interest assumes the rate stays the same for the whole amortization.
To qualify, federally regulated lenders also check that you could afford payments at a higher qualifying rate (the stress test). Ask your lender for the current rule.