If you compare a Canadian mortgage payment to what a simple 'rate divided by twelve' calculation predicts, the real payment is a touch lower. That is not an error. It is the law.
The rule
Canada's federal Interest Act requires that fixed-rate mortgages state interest as compounded no more than twice a year, semi-annually. Most other countries, including the United States, compound monthly. Semi-annual compounding produces a slightly lower effective monthly rate for the same quoted annual figure.
The conversion
To turn a quoted annual rate into the effective monthly rate used for the payment, Canadian lenders use:
monthly rate = (1 + annual ÷ 2)1/6 − 1
The reasoning: the annual rate is split into two semi-annual periods (annual ÷ 2), and each of those is spread across six months, hence the sixth root. Apply this monthly rate to the standard payment formula and you get the correct Canadian payment. Using annual ÷ 12 instead would overstate it.
Why it matters
On any single payment the difference is small, but over a 25-year amortization it adds up, and a calculator that uses the wrong method will consistently overstate your payment. Our Canadian calculator uses the correct semi-annual convention.
Term versus amortization
One more Canadian distinction: the term is how long your rate is fixed, often five years, while the amortization is how long the whole loan takes to repay, often 25 years. You renew the rate each time the term ends. Variable-rate mortgages, by contrast, compound monthly.