What the new rate does to the payment.
Your balance, the amortization left, the rate you have and the rate you have been offered. This returns the payment before and after, using the half-yearly compounding every Canadian fixed-rate mortgage is written on, so the figure matches the lender's.
New payment
Put in the balance, the years left, and the two rates. The payment updates as you type.
Payment = balance x i / (1 - (1 + i)^-n), where i is the rate per payment equivalent to the stated annual rate compounded on the basis chosen above and n is the number of payments left. The half-yearly basis is the one section 6 of the Interest Act requires a blended-payment mortgage to state. The 39 per cent line is CMHC’s gross debt service limit for an insured mortgage, a lending convention rather than a statute.
Not covered here
- Prepayment penalties. Three months' interest or the interest rate differential, whichever the contract makes larger, and the differential formula is the lender's own.
- Renewal fees, lender fees and broker fees, which on a private or B-lender mortgage can be a full percentage point of the balance.
- Mortgage default insurance premiums, property tax and home insurance, whether or not the lender collects them with the payment.
- Whether you will qualify at all. A switch to a new lender means a fresh application at the stress-test rate; a renewal with your current lender usually does not.
- A rate hold, a blend-and-extend, or a change of amortization at renewal, each of which changes the arithmetic here.
This applies the standard Canadian payment formula, with interest compounded twice a year as section 6 of the Interest Act requires a fixed-rate mortgage to state, to the figures you enter. It does not predict whether a lender will renew you or at what rate, and it leaves out prepayment penalties, renewal or lender fees, mortgage default insurance, property tax and insurance. The share-of-income figure is the payment alone and understates the ratio a lender would calculate. This is general information, not financial or legal advice.
If the new figure is not one you can pay, the time to act is before the renewal date, while you are still a borrower in good standing and not one in default. Renewal shock on a private or B-lender mortgage explains what the lender can and cannot do, and Telesh Law Firm Professional Corp can read the commitment letter before you sign it.