Question 1

What is Canadian mortgage compounding?

Accepted Answer

Canadian mortgages compound semi-annually by law under the Interest Act, unlike US mortgages which compound monthly. This means the effective annual rate is slightly lower than simply doubling the semi-annual rate. Our calculator applies the correct formula: effective monthly rate = (1 + annual rate / 2)^(1/6) − 1.

Question 2

What does LTV mean?

Accepted Answer

LTV stands for Loan-to-Value ratio — your mortgage amount divided by the property's appraised value. For example, a $520,000 mortgage on a $650,000 home is an 80% LTV. Lenders use LTV to assess risk; ratios above 80% require CMHC mortgage insurance.

Question 3

What is CMHC insurance?

Accepted Answer

CMHC (Canada Mortgage and Housing Corporation) insurance is mandatory when your down payment is less than 20% of the purchase price. The premium ranges from 2.80% to 4.00% of the mortgage amount depending on your LTV, and it's added to your mortgage principal. It protects the lender, not you, but it enables you to buy with as little as 5% down.

Question 4

How does payment frequency affect my mortgage?

Accepted Answer

Accelerated bi-weekly payments split your monthly payment in half and pay it every two weeks — equivalent to 13 months of payments per year. This can shave 3–4 years off a 25-year mortgage and save tens of thousands in interest. Standard bi-weekly and weekly frequencies don't have the same accelerating effect.

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