Question 1

How is the minimum down payment calculated in Canada?

Accepted Answer

For homes priced at $500,000 or less, the minimum down payment is 5% of the purchase price. For homes between $500,000 and $1.5 million, you put 5% on the first $500,000 plus 10% on the portion above. For homes priced at or above $1.5 million, the minimum is 20% of the full purchase price. These rules are set by federal regulation and apply to insured (default-insured) mortgages.

Question 2

What is CMHC mortgage insurance and when is it required?

Accepted Answer

CMHC mortgage insurance (also called mortgage default insurance) protects your lender if you stop making payments. It is mandatory whenever your down payment is less than 20% of the home price, unless your purchase price is at or above $1.5 million in which case insurance is unavailable. The premium ranges from 2.80% to 4.00% of the loan amount depending on your loan-to-value ratio, and it is added to (financed by) your mortgage. Provincial PST on the premium — 8% in Ontario, 9% in Quebec, 6% in Saskatchewan — is paid upfront in cash at closing.

Question 3

What is the Canadian mortgage stress test in 2025?

Accepted Answer

The federal mortgage stress test requires that you qualify for a mortgage at the greater of your contract rate plus 2 percentage points or the Bank of Canada benchmark rate (currently 5.25%). The test is administered by your lender during the application; you do not actually pay the higher rate, you only need to demonstrate you could afford it. It applies to all federally regulated lenders and to most insured mortgages, regardless of down payment size.

Question 4

How does semi-annual compounding affect my mortgage in Canada?

Accepted Answer

The Interest Act of Canada requires fixed-rate mortgages to be compounded semi-annually rather than monthly. This means your effective monthly periodic rate is calculated as (1 + annual_rate / 2)^(1/6) − 1, which is slightly lower than the simple annual_rate / 12 formula used by US calculators. On a $600,000 mortgage at 5%, the difference is roughly $15-$20 per month. Variable-rate Canadian mortgages compound monthly, so this rule does not apply to them.

Question 5

What is land transfer tax and which provinces charge it?

Accepted Answer

Land transfer tax (LTT) is a one-time tax paid at closing when ownership of a property is transferred to you. Most provinces charge it as a tiered, marginal-rate tax on the purchase price — Ontario, BC, Quebec, Manitoba, Nova Scotia, New Brunswick, and PEI all have versions of it. Alberta, Saskatchewan, and Newfoundland charge only a small flat title transfer fee instead. If you buy within the City of Toronto, you pay the Ontario LTT plus a separate municipal LTT in roughly equal amounts.

Question 6

How do lump-sum prepayments reduce my mortgage?

Accepted Answer

Most Canadian mortgages allow you to prepay a percentage of the original principal each year — typically 10% to 20% — without penalty. Every dollar you prepay goes directly to principal, which means it skips ahead of all the interest that dollar would have accumulated over the remaining amortization. A single $10,000 lump sum on a 25-year mortgage at 5% can save you roughly $20,000 in total interest and shorten your amortization by about a year. Use the Debt Crusher tool above to see your specific savings.

Question 7

What's the difference between a fixed and variable rate mortgage?

Accepted Answer

A fixed-rate mortgage locks your interest rate for the term of your contract — usually 5 years — so your payment is predictable. A variable-rate mortgage moves with your lender prime rate, which tracks the Bank of Canada policy rate; your payment may stay the same with the principal/interest split shifting, or it may change at each rate decision, depending on the product. Variable rates have historically averaged lower over long periods, but at the cost of monthly uncertainty. Fixed and variable also use different compounding rules under Canadian law: fixed compounds semi-annually, variable compounds monthly.

Question 8

How much does a $600,000 mortgage cost per month in Canada?

Accepted Answer

A $600,000 mortgage at a 5.19% fixed rate over 25 years costs approximately $3,558 per month for principal and interest. The exact figure depends on your rate type (fixed or variable), amortization length, and whether CMHC insurance is rolled into the principal. You can plug your specific numbers into the calculator above to get an exact monthly payment, including land transfer tax, closing costs, and a stress test result.

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