The cost of borrowing money, calculated as a percentage of the outstanding principal.
Mortgage interest in Canada is calculated differently for fixed and variable rates. Fixed rate mortgages use semi-annual compounding (required by law), while variable rate mortgages use monthly compounding. This means the effective annual rate on a fixed mortgage is slightly higher than the stated rate. On a $400,000 mortgage at 5% over 25 years, you will pay approximately $297,000 in total interest, almost as much as the original loan amount.
Related terms: Principal | Fixed Rate Mortgage | Variable Rate Mortgage