Why US Mortgage Calculators Are Wrong in Canada
A US mortgage calculator overstates a Canadian closed fixed-rate payment. Canadian fixed-rate mortgages are normally compounded semi-annually, not monthly. (The Interest Act, s. 6 only requires the rate to be stated yearly or half-yearly, not in advance; semi-annual is the market standard.) You pay the contract rate; the effective monthly rate is (1 + annual/2)^(1/6) − 1, not annual/12.
On a $500,000 mortgage at 4.29% with a 25-year amortization, the same engine as our calculator produces:
| Convention | Effective monthly rate | Monthly P&I |
|---|---|---|
| Canadian semi-annual | (1 + 4.29%/2)^(1/6) − 1 | $2,709 |
| US-style monthly | 4.29% / 12 | $2,720 |
That is about $11 a month and roughly $3,200 over 25 years — not a rounding error, a different compounding convention. The gap widens as the rate and the balance rise.
Do not use a US app to size a Canadian offer. Run the Canadian mortgage payment calculator and read the methodology.
Frequently asked questions
Why is a Canadian mortgage payment lower than a US calculator shows?
Canadian closed fixed-rate mortgages are normally compounded semi-annually. US calculators divide the annual rate by 12. On a $500,000 mortgage at 4.29% over 25 years the Canadian payment is about $2,709 and the US-style payment is about $2,720.
Does this apply to variable-rate mortgages?
Variable-rate products can compound differently. This comparison is for the closed fixed-rate convention the payment calculator uses by default.
Where is the formula documented?
On the methodology page. The live calculator uses the same engine as the table in this post.