| Month | Payment | Principal | Interest | Balance |
|---|---|---|---|---|
| 1 | $978.31 | $707.47 | $270.83 | $49,292.53 |
| 2 | $978.31 | $711.31 | $267.00 | $48,581.22 |
| 3 | $978.31 | $715.16 | $263.15 | $47,866.06 |
| 4 | $978.31 | $719.03 | $259.27 | $47,147.03 |
| 5 | $978.31 | $722.93 | $255.38 | $46,424.10 |
| 6 | $978.31 | $726.84 | $251.46 | $45,697.26 |
| 7 | $978.31 | $730.78 | $247.53 | $44,966.48 |
| 8 | $978.31 | $734.74 | $243.57 | $44,231.74 |
| 9 | $978.31 | $738.72 | $239.59 | $43,493.02 |
| 10 | $978.31 | $742.72 | $235.59 | $42,750.30 |
| 11 | $978.31 | $746.74 | $231.56 | $42,003.55 |
| 12 | $978.31 | $750.79 | $227.52 | $41,252.77 |
Common questions about loan repayment in Canada
A fixed-rate loan has an interest rate that remains constant for the entire term, providing predictable payments. A variable-rate loan has an interest rate that fluctuates based on the Bank of Canada's policy rate or the lender's prime rate. Variable rates are typically lower initially but carry the risk of increasing. Fixed rates provide certainty while variable rates may cost less over time depending on rate movements.
Most Canadian fixed-rate loans include a prepayment penalty if you pay off the loan early or make extra payments beyond your allowed prepayment privileges. The penalty is typically the greater of: (1) three months' interest, or (2) the Interest Rate Differential (IRD), which compensates the lender for lost interest. Variable-rate loans usually have a penalty of only three months' interest. Check your loan agreement for specific prepayment terms.
A term loan provides a lump sum with fixed repayment terms -- you make regular payments of principal and interest until the loan is paid off. A line of credit (LOC) is a revolving credit facility where you can borrow and repay repeatedly up to your credit limit, paying interest only on the amount used. LOCs typically have variable rates and are more flexible, while term loans offer the discipline of scheduled repayment.
Debt consolidation combines multiple debts (credit cards, personal loans, etc.) into a single loan with one payment, ideally at a lower interest rate. In Canada, common consolidation options include personal loans, home equity loans/HELOCs, balance transfer credit cards, and consumer proposals. The key benefit is simplifying payments and potentially reducing total interest cost. However, consolidation only works if you address the underlying spending habits.
Personal loan interest is generally not tax-deductible in Canada. However, interest on money borrowed for investment purposes (the "Smith Manoeuvre" concept) may be deductible under CRA rules. Business loan interest is deductible as a business expense. Student loan interest qualifies for a non-refundable federal tax credit. Mortgage interest on your principal residence is not deductible, but interest on a rental property mortgage is deductible against rental income.
More frequent payments (biweekly or weekly) can reduce total interest compared to monthly payments because you are reducing the principal faster. With biweekly payments, you make 26 half-payments per year (equivalent to 13 monthly payments instead of 12), which accelerates payoff. On a $50,000 loan at 6.5% over 5 years, switching from monthly to biweekly payments can save several hundred dollars in interest.
CRA-Aligned: This calculator provides estimates based on standard amortization formulas. Actual loan terms may vary by lender. This tool is for educational purposes only.
How loan repayments work and what affects your monthly payments
How are loan repayments calculated in Canada?
Most Canadian loans use an amortisation schedule where each payment covers both interest and principal. In the early years, most of your payment goes toward interest. Over time, a larger portion goes to principal. On a $300,000 mortgage at 5% over 25 years, your monthly payment is about $1,745, and you pay roughly $223,500 in total interest over the life of the loan.
What is the difference between fixed and variable rates?
A fixed rate stays the same for the entire term (typically 1 to 5 years in Canada). A variable rate moves with the Bank of Canada's overnight rate. Historically, variable rates have been lower over time, but they carry more risk if rates rise sharply. In 2025, fixed rates range from about 4% to 6%, while variable rates are typically 0.5% to 1% lower.
What is amortisation vs mortgage term?
The amortisation period is the total time to pay off the loan — typically 25 years in Canada (30 years for first-time buyers since 2024). The mortgage term is how long your current rate is locked in, usually 1 to 5 years. At the end of each term, you renew at a new rate for the remaining amortisation period. These are two different concepts that many people confuse.
Can you pay off your loan faster?
Most Canadian mortgages allow prepayments — extra payments on top of your regular schedule. Common options include increasing your regular payment by 10% to 20%, making lump-sum payments of up to 10% to 20% of the original balance per year, and switching to accelerated bi-weekly payments. Even small extra payments can save thousands in interest and years off your mortgage.
What is the mortgage stress test?
Since 2018, all Canadian mortgage borrowers must qualify at a stress test rate — the higher of your contract rate plus 2%, or the Bank of Canada benchmark rate (currently 5.25%). On a $500,000 mortgage at 4.5%, you must prove you can afford payments at 6.5%. This rule limits how much you can borrow and protects against rate increases.
How does CMHC mortgage insurance work?
If your down payment is less than 20% of the purchase price, you must buy mortgage default insurance from CMHC, Sagen, or Canada Guaranty. The premium ranges from 2.8% to 4% of the mortgage amount and is usually added to the loan. On a $400,000 mortgage with a 10% down payment, the insurance premium is about $11,200. This is a one-time cost, not an annual fee.
Are loan interest payments tax-deductible?
Interest on a personal mortgage for your home is not tax-deductible in Canada — unlike in the US. However, interest on loans used for investment purposes (like buying rental property or investing in stocks) is generally deductible. Interest on business loans is also deductible. Some homeowners use strategies like the Smith Manoeuvre to convert mortgage interest into deductible investment loan interest.
CRA-Aligned: Based on 2025 CRA rates and thresholds. For personal advice, speak to a qualified accountant or tax professional.
Disclaimer: This calculator provides estimates based on current CRA rates and thresholds for the 2025 tax year. It does not constitute professional tax, financial, or legal advice. Your actual liability may differ depending on your individual circumstances. Always consult a qualified accountant before making financial decisions. Read our terms
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