Bank of Canada Maintains the Policy Rate at 2.25%
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Today, August 12, 2026, nesto’s {term}-year {type} mortgage rate is {bps} bps ({bps_percent}) lower than the average at Canada’s Big 6 Banks. On a {mortgage_ammount} mortgage over a {amortization_period}-year amortization, with nesto, your monthly payment would be {nesto_monthly_payment}, saving you up to {monthly_savings} on your monthly payment. This equals {savings_interest} in interest saved while allowing you to pay down {extra_payment} extra on principal over your term.
Calculating Your Mortgage Payment
A mortgage payment calculator in Canada helps estimate monthly mortgage payments based on home price, down payment, interest rate, amortization period, and payment frequency. nesto’s online mortgage payment calculator will help you quickly estimate mortgage payments alongside a corresponding amortization schedule.
Mortgage Industry Insights: August 2026
Bank of Canada Rate Announcement
The Bank of Canada (BoC) held its policy rate at 2.25% at its July 15 announcement. In its accompanying outlook, the Bank pointed to a steadier economic backdrop. It reiterated its commitment to bringing inflation back to its 2% target, while flagging Middle East-driven oil prices as a risk still in play.
Bond markets price a high probability of another hold at the Bank’s September 2 announcement, with a 1% chance of a 25-basis-point hike. By October 28, markets imply a 36% chance of a hike.
A Bank of Canada decision affects fixed and variable mortgages differently. If you hold a variable-rate mortgage (VRM) or an adjustable-rate mortgage (ARM), a rate change flows through directly, adjusting your principal-and-interest split (VRM) or your payment itself (ARM), within days of your lender updating its prime rate. If you hold a fixed-rate mortgage, nothing changes until your term is up, since your rate and payment are locked for its full length. Either way, the next decision, on September 2, is the one to watch if you’re renewing or shopping for a new mortgage soon.
Real Estate Market Update
The Canadian Real Estate Association (CREA) reports that national home sales rose 0.5% month over month in June 2026, marking the third straight monthly gain and building on May’s 5.5% increase and April’s 0.9% uptick. New listings fell 1.3% month over month, the second consecutive monthly decline, pushing the national sales-to-new-listings ratio (SNLR) up to 50.2%, the first reading above 50% so far this year. The national average home price was $696,078 in June, up 0.5% from a year earlier, while the MLS Home Price Index held steady month over month for the first time since January 2025 and was down 3.6% year over year, the smallest annual decline since last October. With Bank of Canada rate hikes largely off the table for the rest of the year, activity is on pace to keep building into the fall, led by pent-up demand from first-time buyers who have been waiting on the sidelines.
CPI Inflation Update
Inflation eased to 2.8% year-over-year in June, down from 3.2% in May. Slower gasoline price growth drove the deceleration, as diplomatic talks and an interim ceasefire arrangement eased global oil prices, with gasoline up 20.5% year-over-year, versus 33.2% in May. Excluding gasoline, inflation held steady at 2.2%, unchanged from May, and the Bank’s core measures dipped below target for the first time this year, with the trimmed-mean rate at 1.8% and the median rate at 1.9%. Food price growth also slowed, easing to 3.5% year-over-year from 3.8% in May.
Best Mortgage Rates
How to Use a Mortgage Payment Calculator
To get started with a mortgage calculator in Canada, you will need to input some details about your home purchase, including the asking price, downpayment, amortization, and payment frequency. Depending on your downpayment, the calculator will also show you if mortgage default insurance (CMHC) is required and how much you will pay for the premium.
- Asking Price (New Purchase Only): Enter the home’s purchase price here.
- Current Property Value (Refinance and Renewal Only): Enter the current value of your home here if you are looking to refinance or renew.
- Mortgage Balance (Refinance and Renewal Only): Enter the remaining balance on your mortgage here if you want to refinance (your remaining balance should include any additional amount for your equity takeout if applicable) or renew.
- Province (Refinance and Renewal Only): Enter the province where the property is located.
- Downpayment (New Purchase Only): Enter the amount you saved for a downpayment here, or enter the percentage you wish to put down on the home.
- Amortization Period (New Purchase Only): This is the time it takes to pay off the mortgage, typically 25 or 30 years, depending on the downpayment amount. Enter the length of time you want to take to pay off your mortgage completely.
- Remaining Amortization (Refinance or Renewal Only): Enter the remaining time on your mortgage here. For refinances, you could increase your amortization back to 25 or 30 years without impacting your mortgage rate.
- Payment Frequency: This is how many times per month you wish to make mortgage payments. You can choose monthly, semi-monthly (2x a month), bi-weekly (every 2 weeks), and weekly. You can also accelerate payments by choosing accelerated weekly or bi-weekly to speed up the time it takes to pay off the mortgage.
- Mortgage Rate (Optional): If you don’t have a rate yet, you can use the pre-selected rate or enter your rate here if you have already been offered one. Multiple factors determine your preselected rate, but most importantly, your transaction type (purchase/renewal/refinance) and your loan-to-value (LTV) ratio make the biggest impact.
- Annual Property Taxes (Optional): Enter the annual property taxes for the property if you wish to estimate your total mortgage payments, including property taxes. This is useful for budgeting purposes.
- Monthly Condo/Maintenance Fees (Optional): If you are purchasing a condo, add the monthly maintenance fee here to estimate total mortgage payments, including the maintenance fee. This is useful for budgeting purposes.
Example Calculation of a $450,000 Mortgage in Canada
To calculate mortgage payments without the use of an online calculator, you can use the formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
- M is your mortgage payment: This will be a monthly, semi-monthly, bi-weekly, or weekly amount.
- P is your principal: This is your total mortgage amount after deducting your downpayment. If you put down less than 20% as a downpayment, you must add your mortgage default insurance premium to the mortgage amount if you do not plan to pay it upfront in cash.
You can find your premium by calculating your loan-to-value (LTV) ratio and using the CMHC chart to locate it. Once you know the percentage, you can calculate the premium as follows:
Premium Amount = (Mortgage Amount – Downpayment) x Premium
- i is your interest rate: This will be the interest rate you have been offered.
- Monthly interest rate / 12
- Semi-monthly interest rate / 24
- Bi-weekly interest rate / 26
- Weekly interest rate / 52
- n is the number of payments: This is the number of payments over the amortization period.
- Monthly payments x 12
- Semi-monthly x 24
- Bi-weekly x 26
- Weekly x 52
Today’s Best Mortgage Rates as of August 12, 2026
What Is a Mortgage Payment?
A mortgage payment is the recurring amount of money you pay at regular intervals to pay down your mortgage balance. A mortgage payment consists of 2 main components: principal and interest. The mortgage payment is specific to the amortization period and the term during which the rate is guaranteed.
In the case of an adjustable-rate mortgage (ARM), where the payment may fluctuate, the interest rate won’t stay constant for the life of the mortgage, possibly not even for the term, so interest costs can only be estimated. Changes in the mortgage payment will not impact your amortization schedule if you choose an ARM.
For variable-rate mortgages (VRM), where the payment stays constant, interest costs cannot be estimated as the interest-carrying costs for the term will fluctuate based on changes in interest rates. This will affect the principal amount paid during the term and possibly the amortization over the life of the mortgage.
Interest costs can be easily calculated for fixed-rate mortgages where the principal and interest remain constant for the term. Since there are no rate fluctuations, once you’ve locked in, you will know exactly how much you will pay in principal and interest during your term.
Mortgage Default Insurance
If your downpayment is less than 20% of the purchase price or property valuation, you must account for high-ratio default insurance premiums as part of your mortgage payment amount. You can avoid this by paying the premium upfront in cash or making a downpayment of 20% or more to avoid the insurance.
Mortgage Default Insurance is provided by one of Canada’s 3 high ratio default insurers, Canada Mortgage and Housing Corporation (CMHC), Sagen (GE) or Canada Guaranty (CG). It is only available for properties with a purchase price or valuation of $1 million or less. If you plan on purchasing a home over $1 million, you must make a downpayment of 20% or more for a conventional mortgage.
How the Mortgage Stress Test Affects Your Payment
Every new mortgage transaction in Canada is stress tested, regardless of your downpayment size. This includes new purchases, refinances, and any mortgage moving from a non-federally regulated lender, such as a B lender, subprime, or alternative lender, to a federally regulated lender, such as a CMHC-approved lender. Instead of qualifying you at your actual contract rate, lenders use a higher qualifying rate to confirm you could still afford your payments if rates rise after your mortgage is advanced.
The qualifying rate is the greater of your contract rate plus 2% or 5.25%, the minimum floor set by the Office of the Superintendent of Financial Institutions (OSFI) under Guideline B-20. For example, nesto’s current 5-year insured fixed qualifying rate is 6.09%, compared to the actual rate of 4.09% you would pay on your mortgage payments.
The stress test doesn’t change the rate you pay or the size of your monthly payment. It only affects the maximum mortgage amount a lender will approve, since a higher qualifying rate lowers how much you can borrow while still meeting the GDS and TDS ratio limits.
Factors That Can Affect Your Mortgage Payments
Several factors can affect your mortgage payments. These include:
- Credit Score: A minimum score of 680-720 is needed to get the best rates, depending on the mortgage solution and lender.
- Subject Property Location: Residential mortgage rates apply only to residentially zoned properties.
- Purchase Price or Valuation: A higher borrowed amount means higher mortgage payments. A higher downpayment will lower your borrowed amount and make qualifying easier.
- Loan Amount: The loan amount will be net of any downpayment made before any applicable default insurance premiums are added. A minimum downpayment of 5% is required on the first $500,000 purchase price/valuation, and 10% is required on any remaining amount over $500,000. A 20% downpayment on the full amount is required if the purchase price/valuation is $1,000,000 or more.
- Downpayment: A higher downpayment will reduce the loan amount and lower mortgage payments.
- Interest Rate: Higher interest rates will mean larger mortgage payments. Interest rates will change based on the mortgage amount as the ratio of the purchase price/home valuation (known as the loan-to-value (LTV) ratio).
- Amortization Period: The longer the amortization period selected, the lower the mortgage payments will be, but you will pay more in interest over the life of the loan. The shorter the amortization period, the higher the mortgage payments will be, but you will save on interest-carrying costs over the life of the loan.
- Loan-to-Value (LTV) Ratio: The LTV determines mortgage eligibility and will affect the interest rate offered and the mortgage default insurance premium. A higher LTV ratio means a higher mortgage payment.
Using a Payment Calculator to Lower Your Mortgage Payment
There are a few options available to reduce your mortgage payments. You can extend your current amortization or make a prepayment, allowing you to re-amortize to the original remaining amortization after the prepayment. If you find a lower mortgage rate and the penalty to break your current term is less than the cost savings, you could early renew or refinance your mortgage.
Ways to Pay Off Your Mortgage Faster
Paying off your mortgage faster may not always be possible or in your best interest, depending on market conditions and your financial situation. However, some steps you can take could save you thousands in interest and help reduce the time it takes to pay off your mortgage.
Prepayment privileges allow you to make extra payments directly to the principal portion of your mortgage. Many prepayment options are available, with limitations set by the lender and mortgage solution. Overall, any prepayments on your mortgage will save you time (by reducing amortization) and money (by reducing interest), helping you become mortgage-free faster.
There are several ways to take advantage of prepayments, including:
- Lump Sum Payments: These can be made as a single lump sum payment once a year at any time, on the anniversary date of the mortgage, or in the form of multiple smaller lump sum payments throughout the year, as long as you do not exceed your lender’s allowable amount and schedule.
- Double-Up Payments: This option allows you to automate lump-sum payments to double up and match your regularly scheduled payments.
- Increase Regular Payments: Depending on the lender, you can increase your regular mortgage payments by the percentage of the allowable prepayment privilege each year, on or before your anniversary date. For example, if you have a 10% prepayment privilege, you can increase your regular mortgage payments by 10% once a year.
- Payment Frequency: While technically not a prepayment privilege, this option allows you to accelerate your weekly or bi-weekly payments, reducing your amortization by a few years and reducing interest-carrying costs. You will have the semi-monthly payment amount applied 26 times a year for accelerated bi-weekly payments. In comparison, accelerated weekly payments are half the semi-monthly amount applied 52 times a year.
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Frequently Asked Questions (FAQ) About Calculating Mortgage Payments
How do I use a mortgage payment calculator?
To use a mortgage payment calculator, start by choosing the type of mortgage (new, refinance, or renewal). Then, fill out the mortgage details (asking price, downpayment, amortization, payment frequency, interest rate, optional taxes, fees, etc.).
The calculator will provide a payment summary that breaks down the total mortgage payment based on the frequency you selected, the amount of mortgage default insurance (CMHC) added to the mortgage amount (if required), and the principal and interest paid over the term and amortization.
The amortization schedule tab shows a breakdown of the total principal and interest paid and the remaining mortgage balance at the end of each year.
What is an amortization schedule?
An amortization schedule is the life of the mortgage. This is the total time it takes to fully pay off the principal and interest on the borrowed amount. Amortizations are up to 25 years on mortgages with down payments of less than 20%, while mortgages with down payments of more than 20% can typically go up to 30 years or more, depending on your choice of mortgage solution and lender.
Amortization schedules will help you see your progress toward becoming mortgage-free. At any point during the amortization period, you can see what portion of each mortgage payment goes toward the principal and interest. Once you reach the halfway point of your mortgage, you’ll notice that a higher proportion of your payment goes to your principal.
How does my income impact my mortgage payment?
Your income is one key factor that lenders use to determine how much they are willing to lend you for a mortgage. Lenders do this using debt service ratios, which show them whether you have the capacity to take on the debt and repay the mortgage.
The gross debt service ratio (GDS) is the amount of your pre-tax income that would be spent on household debts. They will look at the mortgage payment, property taxes, heating, and 50% of condo or maintenance fees (if applicable). Typically, the maximum allowable GDS ratio is 32% for uninsured mortgages and 39% for insured mortgages.
The total debt service ratio (TDS) is the pre-tax income you would spend to service all debts. In addition to the debts that make up the GDS ratio, TDS will also account for student or car loans, child or spousal support, and credit card or line of credit payments that you may have. Typically, the maximum allowable TDS ratio is 40% for uninsured mortgages and 44% for insured mortgages.
How does being self-employed affect mortgage affordability?
Lenders look at your reported income differently when you’re self-employed, so affordability works a bit differently too. If you’ve used business write-offs to lower your taxable income, that lower number, not your actual earnings, is often what a lender uses to calculate your gross debt service (GDS) and total debt service (TDS) ratios.
Most lenders want two years of tax returns and Notices of Assessment to confirm a stable or growing income. If you don’t have that history yet, or your write-offs make your taxable income look low, some lenders offer alternative documentation programs based on bank statements or an accountant’s letter. These programs typically require a larger downpayment and charge a higher interest rate than a standard mortgage.
How does variable or irregular income affect how much mortgage I can afford?
If your income varies from month to month, whether from commission, bonuses, contract work, or seasonal employment, lenders usually average it over the past two years using your tax documents rather than counting your most recent or best year alone. A strong recent year won’t fully count toward affordability until it’s part of an established pattern.
This averaged figure feeds into your GDS and TDS ratios, so a rising income trend generally helps more than a single high-earning month or quarter. Keep supporting documents such as T4As, contracts, or year-over-year tax returns on hand, since lenders will ask for them to confirm the trend.
Do student loans affect how much mortgage I can afford?
Yes. Student loan payments count as debt in your total debt service (TDS) ratio, alongside any car loans, credit cards, or lines of credit you carry. A higher monthly student loan payment reduces the mortgage amount you can qualify for, even if your income alone would support a larger loan under the gross debt service (GDS) ratio.
Paying down your student loan balance, or consolidating multiple loans into a lower monthly payment, can free up room in your TDS ratio and increase how much mortgage you qualify for.
How much mortgage can two people afford together?
When two applicants apply for a mortgage together, lenders combine both incomes and both sets of debts into one GDS and TDS calculation. Combining incomes usually increases the purchase price you can afford, but every co-borrower’s debts count too, including a partner’s car loan or credit card balance.
Both applicants’ credit scores factor into the mortgage rate you’re offered. Lenders generally use the lower of the two scores when determining eligibility for the best rate, so it helps to check both before applying.
How do I calculate my monthly mortgage payment?
An online mortgage calculator is the easiest way to calculate your mortgage payment. You input the home price, down payment, loan term, and interest rate. The calculator then computes your monthly payment, including principal and interest. Payment calculators often include options to factor in other costs, such as property taxes, home insurance, and, in some cases, mortgage insurance.
What’s the difference between a high-ratio borrower and a low-ratio borrower?
A high-ratio borrower puts down less than 20% as a downpayment and has a loan-to-value (LTV) ratio of 80% or more. This type of borrower will require mortgage default insurance. A low-ratio borrower puts down more than 20% as a downpayment and has an LTV of less than 80%. This type of borrower will not require mortgage default insurance.
What is the most common mortgage payment schedule?
The most common mortgage payment frequency is monthly. This is typically the default payment option, in which mortgage payments are made once per month or 12 times per year.
Do people most commonly choose a 5%, 10% or 20% downpayment?
The most common downpayment depends on the borrower. Most first-time homebuyers (FTHB) will opt for the minimum downpayment option available, which is 5% on the first $500,000 and 10% on the remaining amount between $500,000 and $999,999. For borrowers in large cities where home prices are well above $1 million, a 20% downpayment or more would be required.
Is it better to put 5% or 20% down on a mortgage?
There’s no single right answer. It depends on how much cash you have available and how you weigh paying insurance now against saving more upfront. A 5% downpayment, available on homes priced under $500,000, with a tiered rule above that, requires mortgage default insurance, which adds a premium to your mortgage amount and increases your payment slightly.
A 20% downpayment avoids that insurance premium and can qualify you for uninsured mortgage pricing, but it means saving a much larger amount before you buy. A smaller downpayment often gets first-time buyers into the market sooner, while a 20% downpayment reduces the total cost of borrowing over the life of the mortgage.
Why Choose nesto
At nesto, our commission-free mortgage experts, certified in multiple provinces, provide exceptional advice and service that exceeds industry standards. Our mortgage experts are salaried employees who provide impartial guidance on mortgage options tailored to your needs and are evaluated based on client satisfaction and the quality of their advice. nesto aims to transform the mortgage industry by providing honest advice and competitive rates through a 100% digital, transparent, and seamless process.
nesto is on a mission to offer a positive, empowering and transparent property financing experience – simplified from start to finish.
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