The monthly calculation
For principal P, monthly rate i, and n monthly payments, the fixed principal-and-interest payment is M = P × i / (1 − (1 + i)^−n). Each period, interest is the opening balance multiplied by i. The remainder of the payment reduces principal; the new balance is the old balance plus interest minus payment.
Sources for this section: Financial Consumer Agency of Canada: choosing a mortgage
Worked example
Suppose a fictional $300,000 loan has a 6% nominal annual rate, monthly payments, and a 30-year (360-payment) amortization. Using i = 0.06 / 12, the unrounded payment is about $1,798.6516, displayed as $1,798.65. Total scheduled payments are about $647,514.57 and total interest about $347,514.57, before rounding the displayed payment. A lender that rounds each payment or uses a different interest convention can produce a slightly different schedule.
Canadian payment convention is a separate model
For a fictional Canadian mortgage of $300,000 at a 6% quoted annual rate, 25-year amortization, and semi-annual compounding, convert the quoted rate to a monthly effective rate: (1 + 0.06 / 2)^(2 / 12) − 1 ≈ 0.4939% per month. The resulting payment is about $1,919.42. This is not the same calculation as simply dividing 6% by 12; actual contract terms and lender rounding still matter. The Canadian renewal calculator separately models renewal payment change over its entered comparison term.
Sources for this section: Financial Consumer Agency of Canada: choosing a mortgage
What this leaves out
These illustrations assume a constant rate and payment, monthly periods, and no extra principal. The payment is principal and interest—not total housing costs. Taxes, insurance, utilities, fees, penalties, payment-date effects, and lender-specific rounding rules are excluded. An amortization estimate is not a payoff quote.
Sources for this section: Financial Consumer Agency of Canada: choosing a mortgage