For a majority of Canadians, buying a home will be the single biggest purchase they ever make, and getting a mortgage is an essential part of this process. But how do you ensure you get a mortgage that you can actually afford over the long term? That’s where a mortgage payment calculator comes in.
Why use a mortgage payment calculator?
Just how much a home mortgage will end up costing you over the long haul can be hard to fully grasp, especially when you factor in interest. A mortgage payment calculator is an indispensable tool that will help you understand what your payments will be over time and gives you a more accurate sense of what you can afford.
By using a mortgage calculator to estimate your payments, you’ll have a more realistic picture of the options available to you and you’ll be better placed to assess mortgage products. In short, a mortgage payment calculator can help you see how a mortgage fits within your current financial plans, as well as how it may affect your future goals.
How are mortgage payments calculated?
By plugging a few key numbers into a mortgage payment calculator, you’ll get a reliable estimate of your monthly payment amount. Here are the most important variables that determine your mortgage payments:
Mortgage amount: The total amount of money you’ll need to borrow to cover the cost of the home. You can calculate your total mortgage amount by deducting your down payment from the asking price of the home. If your down payment represents less than 20% of the purchase price, you will have to add the cost of mortgage default insurance. Our calculator does this for you—simply enter the purchase price of the home and the down payment you have.
Amortization period: The number of years it will take you to repay the mortgage in full. Borrowers with less than a 20% down payment have a maximum amortization of 25 years. Those with more than 20% have access to 30-year mortgages.
Interest rate: The rate of interest you’ll pay on any outstanding mortgage balance. Your rate will depend on your mortgage provider and the terms of your mortgage, such as whether you decide to go with a fixed or a variable rate, as well as your credit history and employment status.
Payment frequency: The interval at which you make your mortgage payments. While our calculator shows you what the monthly, bi-weekly and accelerated bi-weekly payments would be, borrowers sometimes also have the choice of semi-monthly, weekly or accelerated weekly payment options. The frequency of your payments will influence the size of each payment and how many payments you make per year.
To calculate your mortgage payments, enter these details into the mortgage payment calculator. (Note the calculator will automatically display the best rates available in your region, but you can also enter your own rate.) The calculator then shows monthly payments across four different scenarios, based on the information you provided. You can alter the size of your down payment, as well as the desired payment frequency, amortization period, interest rate and purchase location to see how your regular mortgage payment will be affected by such changes.
How to lower your mortgage payments
If you’re not comfortable with the mortgage payment estimates you’re getting, keep in mind there are ways you can lower them. For example, you can look for a house with a lower purchase price or make a larger down payment (both will reduce the size of your mortgage). You can opt for a longer amortization, although that will cost you more in interest over time. You can also shop around for a lower mortgage rate or work with a mortgage broker who has access to many lenders.
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