At the minimum, to calculate your mortgage payment, begin by entering the purchase price of your home, the down payment amount, interest rate, and amortization period. The mortgage calculator will automatically update your results as you enter new information.
Most Canadians choose to make monthly mortgage payments, and the calculator defaults to a monthly payment frequency. You can, however, experiment with different payment options such as weekly, bi-weekly, semi-monthly, accelerated weekly or accelerated bi-weekly payments to see how your mortgage payment would change under these different conditions.
Amortization is the number of years you expect to pay off your mortgage in full. It's used to calculate your mortgage payments. The longer the amortization period, the more interest you'll have to pay in total on your mortgage.
A mortgage term is the amount of time you will be committing to a specific mortgage lender and the interest rate they're offering you. It's a contract that says that you'll stick with a particular mortgage lender for a period of time. After your mortgage term is up, you are free to renew your mortgage with another lender or stay with your current lender. Typically, in Canada, the average mortgage term is 5 years, and most interest rates are fixed.
The interest rate you use in the calculator can have a significant effect on your mortgage payment. To get an accurate assessment of your payments, use an interest rate that most accurately represents the interest rate you could borrow at given current market conditions.
Mortgage insurance, also known as mortgage default insurance, exists to protect the mortgage lender, should the mortgage borrower stop making payments on their mortgage. In Canada, there are three mortgage insurance providers. They are CMHC, Genworth Financial, and Canada Guaranty.
Mortgage insurance is required for all mortgages that have a down payment of less than 20%. Your mortgage insurance premium can be anywhere between 2.8% and 4% of your mortgage, depending on your down payment amount. Quite often, it is the borrower who pays the insurance premiums, not the lender.
In the mortgage payment calculator, if your down payment is less than 20%, the mortgage insurance premiums will already be included in your mortgage payment.
The Canadian Mortgage and Housing Corporation (CMHC) is a Canadian crown corporation that regulates the Canadian housing and mortgage markets. They have mandated that all mortgages that have a down payment of less than 20% must have mortgage default insurance (The minimum down payment is 5%). Mortgage default insurance helps to protect your mortgage lender if you cannot make your mortgage payments.
There are three primary providers of mortgage insurance in Canada, with CMHC being the biggest one. That's why you'll find that "CMHC insurance" and "mortgage insurance" are often used interchangeably.
You can choose to pay your CMHC insurance (or mortgage insurance) premium as a lump sum or spread out over the life of your mortgage as part of your mortgage payments. The mortgage payment calculator includes CMHC insurance in your mortgage payments.
Your mortgage payment is determined by the mortgage principal amount (the amount of money you borrow), the interest rate on your loan, the amortization period, and the payment frequency. Let's breakdown what these individual pieces mean:
When you make a mortgage payment, part of it is going towards paying down the mortgage principal (the actual loan amount), and part of it is going towards the interest charged on your loan. Together these make up your mortgage payment. In the payment schedule, you can view how much of your mortgage payment will go towards paying down the principal and how much will go towards the interest.
You can reduce your mortgage payment in several ways, but be aware that reducing your mortgage payment does have its trade-offs. The following are the most common ways you can reduce your mortgage payments:
The interest rate you receive on your mortgage depends on several different factors that largely depend on your financial strength and creditworthiness.
Borrowers with high paying stable jobs with good to excellent credit scores will often get the most competitive interest rates on their mortgages. Borrowers who have a spotty credit history, have lower incomes or work in unpredictable fields will often get higher interest rates.
Mortgage lenders want to see that you have the ability to make your mortgage payments. They want to make sure that their lending to individuals who won't default on their mortgage, even if interest rates were to rise.
Aside from improving your financial situation, you can find better mortgage rates just by comparison shopping and negotiating with lenders. Don't just settle for the first mortgage rate you're offered. You will find that different lenders offer varying interest rates for the same mortgage.
If you'd instead rather leave the negotiating and comparison shopping to someone else, use a mortgage broker who can do the work for you. When using a mortgage broker, be aware that your broker may not have access to all mortgage rates on the market. So using a broker in combination with a mortgage rate search tool is an excellent way to find yourself a great mortgage.
The minimum down payment on your mortgage depends on the value of the home you're looking to purchase. It's broken down as follows:
To illustrate how this works, let's assume the purchase price of your home is $800,000. The minimum down payment will be 5% on the first $500,000, which is $25,000. And 10% on the remaining $300,000, which is $30,000. In total, the minimum down payment on your $800,000 home purchase will be $55,000 ($25,000 + $30,000).
The closing of a home purchase refers to the last steps before the ownership of the property officially changes. Closing involves lawyers releasing and distributing payments, the title of the home changing, and keys being handed over to the purchaser.
Closing your home purchase also comes with associated costs. Be prepared to pay anywhere from 1% to 4% of your home's purchase price in closing costs. For example, if you purchase a home for $650,000, then you'd want to budget aside an extra $6,500 to $26,000 for closing costs.
Examples of closing costs may include:
Your mortgage does not cover these closing costs. It's expected that you pay for closing costs up front in cash. Be sure to budget appropriately for closing costs, as land transfer taxes and other expenses can vary from city to city.