Mortgage Interest Calculator Canada
| Month | Principal | Interest | |
|---|---|---|---|
June, 2021 | $450,000.00 | $1,217.71 | $746.89 |
July, 2021 | $448,782.29 | $1,219.73 | $744.87 |
Aug, 2021 | $447,562.56 | $1,221.75 | $742.85 |
Sept, 2021 | $446,340.81 | $1,223.78 | $740.82 |
Oct, 2021 | $445,117.03 | $1,225.81 | $738.79 |
Nov, 2021 | $443,891.22 | $1,227.85 | $736.75 |
Dec, 2021 | $442,663.37 | $1,229.89 | $734.72 |
Jan, 2022 | $441,433.48 | $1,231.93 | $732.68 |
Feb, 2022 | $440,201.56 | $1,233.97 | $730.63 |
Mar, 2022 | $438,967.59 | $1,236.02 | $728.58 |
Apr, 2022 | $437,731.57 | $1,238.07 | $726.53 |
May, 2022 | $436,493.50 | $1,240.13 | $724.48 |
Mortgage Interest Calculator Canada
When you make a mortgage payment, you are paying towards both your principal and interest. Your regular mortgage payments will stay the same for the entire length of your term, but the portions that go towards your principal balance or the interest will change over time.
As your principal payments lower your principal balance, your mortgage will become smaller and smaller over time. A smaller principal balance will result in less interest being charged. However, since your monthly mortgage payment stays the same, this means that the amount being paid towards your principal will become larger and larger over time. This is why your initial monthly payment will have a larger proportion going towards interest compared to the interest payment near the end of your mortgage term.
This behaviour can change depending on your mortgage type. Fixed-rate mortgages have an interest rate that does not change. Your principal will be paid off at an increasingly faster rate as your term progresses.
On the other hand, variable-rate mortgages have a mortgage interest rate that can change. While the monthly mortgage payment for a variable-rate mortgage does not change, the portion going towards interest will change. If interest rates rise, more of your mortgage payment will go towards interest. This will reduce the amount of principal that is being paid. This will cause your mortgage to be paid off slower than scheduled. If rates decrease, your mortgage will be paid off faster.
How to calculate mortgage interest
To calculate interest paid on a mortgage, you will first need to know your mortgage balance, the amount of your monthly mortgage payment, and your mortgage interest rate. For example, you might want to calculate mortgage interest for a mortgage of $500,000 with monthly payments of $2,500 at a 3% mortgage rate .
To find how much interest is paid on your initial monthly mortgage payment, you just need to apply the interest rate against your mortgage balance as a monthly rate. Applying the 3% mortgage rate to the mortgage balance, you will get an annual interest amount of $15,000. You then divide this by 12 to get your monthly interest amount, which would be $1,250. As your monthly payment is $2,500, the remaining amount of $1,250 will go towards your principal.
To calculate mortgage interest paid for the second month, you first need to recalculate your mortgage balance. Since you paid $1,250 towards your principal in the first month, your new mortgage balance is $498,750. The interest paid will be 3% of $498,750 divided by 12 to get a monthly rate. You will get $1,246.87, which is the interest paid in the second month. Your principal payment will be the remaining out of the $2,500 payment, which would be $1,253.13.
Notice how your interest payment is slightly lower while your principal payment is now slightly higher. You paid $3.13 less interest in the second month compared to the first month, and you paid $3.13 more towards your principal in the second month compared to the first month.
You will now repeat the same steps until your mortgage is fully paid off. A way to easily organize and calculate this is to create an amortization schedule. You can use the mortgage interest calculator above to calculate your total interest and principal payments, and also to create a downloadable amortization schedule.
Bi-Weekly vs Monthly Mortgage Payments
Bi-weekly mortgage payments means that you make mortgage payments every two weeks. Since the time between payments is reduced, the effect of lower mortgage balances and resulting lower interest can build up faster. Bi-weekly payments also mean that you will make more mortgage payments in a year.
There are 12 months in a year, which will result in only 12 mortgage payments if you were to make monthly payments. There are 52 weeks in a year, which will result in 26 bi-weekly mortgage payments. This creates an additional 2 bi-weekly mortgage payments, or the equivalent of an extra monthly mortgage payment, every year.
Making more mortgage payments with bi-weekly mortgage payments will allow you to make more payments, resulting in your mortgage being paid off sooner. Choosing bi-weekly payments can let you pay off your mortgage a few years earlier, while also saving you in mortgage interest.