A standard mortgage payment is built from principal, periodic interest rate, and number of payments. The formula is compact, but real results also depend on compounding convention, payment frequency, insurance, taxes, fees, and rounding.
Mortgage Compass calculates the loan schedule in your browser and lets you switch between Canadian and U.S. conventions. The result is a planning estimate, not a lender quote.
The fixed-payment formula
For principal P, periodic rate r, and n scheduled payments, the payment is P times r times (1 + r) to the power n, divided by (1 + r) to the power n minus 1. When the rate is zero, payment is simply principal divided by the number of payments.
Each payment first covers accrued interest under the schedule, with the remainder reducing principal. Early payments generally contain more interest because the balance is larger.
Convert the annual rate correctly
Many U.S. fixed mortgages use a nominal annual rate divided by 12 for monthly calculations. Canadian fixed mortgage rates are generally quoted with semi-annual compounding, which requires an equivalent periodic conversion. The same displayed rate can therefore produce a slightly different payment.
Payment frequency adds another layer. Ordinary biweekly payment divides the annual schedule into 26 calculated periods. Accelerated biweekly is often defined as half the monthly payment every two weeks, creating the equivalent of an extra monthly payment each year.
Add the rest of the housing budget
Principal and interest are not the whole cost of ownership. Add property tax, home insurance, mortgage insurance, condominium or association fees, and a maintenance reserve. Some costs may be collected with the lender payment, but they remain separate economic obligations.
For affordability, compare the combined housing cost and all required debt payments with stable gross and net household income. Leave room for closing, moving, and irregular expenses.
Check a calculator result
Confirm principal, rate, amortization, frequency, country convention, and whether fees or insurance were financed. Compare the first schedule row: interest should equal the opening balance times the periodic rate, subject to the lender's day-count and rounding rules.
Small differences can be legitimate. Large differences often mean one tool included taxes or insurance, used another compounding convention, or interpreted term and amortization differently.
Frequently asked questions
Why does my lender payment differ from a calculator?
Possible causes include compounding, payment timing, financed insurance or fees, rounding, escrowed costs, day-count rules, or an incorrect term or amortization input.
Does paying biweekly always save interest?
Not necessarily. Ordinary biweekly and accelerated biweekly are different. Savings depend on the payment amount, posting method, rate, and contract.
Are taxes included in the mortgage formula?
No. The core formula covers principal and interest. Taxes, insurance, fees, and maintenance must be added separately.
Sources and further reading
Mortgage rules and market data can change. Follow the links for current official information.