How Canadian Mortgages Are Different from American Ones
If you've ever used an American mortgage calculator, you've gotten the wrong answer for Canada. The key difference is how interest is compounded. In the US, mortgage interest compounds monthly. In Canada, lenders are legally required to compound mortgage interest semi-annually — twice per year. This sounds minor but produces meaningfully different payment amounts, especially on long amortizations. Our calculator uses the correct Canadian compounding formula.
The second major difference is mortgage terms. In Canada, you don't lock in your rate for the full amortization period. You choose a term — typically 1 to 5 years — after which you renew at whatever rate is available. The most popular term in Canada is 5 years fixed. Your amortization period (the total time to pay off the mortgage) is separate from your term and is typically 25 years for insured mortgages.
CMHC Mortgage Insurance — When Is It Required?
If your down payment is less than 20% of the purchase price, your mortgage must be insured through the Canada Mortgage and Housing Corporation (CMHC), Sagen, or Canada Guaranty. This is called a high-ratio or insured mortgage. The insurance premium is added to your mortgage balance — you don't pay it upfront in cash.
The CMHC premium in 2026 ranges from 0.60% to 4.00% of the mortgage amount depending on your loan-to-value ratio. On a $500,000 home with 10% down ($50,000), your mortgage is $450,000 and the CMHC premium is 3.10% — adding $13,950 to your mortgage, which you pay off over the amortization period.
| Down Payment |
CMHC Premium |
| 5% – 9.99% | 4.00% |
| 10% – 14.99% | 3.10% |
| 15% – 19.99% | 2.80% |
| 20% or more | No insurance required |
Minimum Down Payment Rules in Canada — 2026
The minimum down payment in Canada depends on the purchase price. For homes up to $500,000 the minimum is 5%. For the portion of a purchase price between $500,000 and $999,999, the minimum is 10%. Homes priced at $1,000,000 or more require at least 20% down and are not eligible for CMHC insurance.
First-time home buyers may also be eligible for the First Home Savings Account (FHSA), which lets you save up to $8,000 per year ($40,000 lifetime) tax-free and use it toward a down payment. Our FHSA calculator shows exactly how much you can save and how much tax you'll get back.
Fixed vs Variable Rate Mortgages in Canada
A fixed rate mortgage locks your interest rate for the full term. Your payment stays the same every period regardless of what happens to interest rates in the market. This provides certainty and makes budgeting easier. Fixed rates are typically slightly higher than variable rates at the time of signing because you're paying for the security of a guaranteed rate.
A variable rate mortgage fluctuates with the Bank of Canada's overnight rate. When rates rise, your payment (or amortization period) increases. When rates fall, you benefit immediately. Historically, variable rates have saved borrowers money over long periods, but the rate volatility of 2022–2024 reminded Canadians that variable mortgages carry real risk.
Use our mortgage calculator with different rate scenarios to see how your payments would change if rates rise or fall by 1–2% at renewal. This stress-test exercise is something every Canadian homebuyer should do before committing to a purchase.
The Mortgage Stress Test — What It Means for You
Since January 2018, all Canadian mortgage applicants must pass a stress test — even if you're putting down 20% or more. You must prove you can afford payments at either your contract rate plus 2%, or 5.25%, whichever is higher. This limits how much you can borrow and is designed to ensure Canadians aren't over-extended if rates rise after they sign.
For example, if you qualify at a 5.5% mortgage rate, you're stress-tested at 7.5%. Your bank calculates your maximum mortgage based on that 7.5% rate, even though you'll actually pay 5.5%. This is why many Canadians find they qualify for less than expected.