There are many factors that go into establishing a mortgage payment, so knowing how to calculate mortgage payment is key if you want a good idea of what your mortgage will cost you each month. Our Canadian mortgage payment calculator is the best mortgage calculator for Canadian mortgages. We keep it up to date so that it takes into account everything that will be included in your mortgage payment. Unlike other mortgage calculators online, it is also free and designed specifically for the Canadian mortgage market. Fill out the calculator to get an accurate estimate of your mortgage payment.
Understanding the Calculator
Our mortgage payment calculator is easy to use, but getting the most out of it requires an understanding of the different terms used in the calculator. This represents what you should know about these terms:
• Asking Price — The asking price of your home is the total that the seller wants from you when you purchase a home.
• Down Payment — Your down payment represents the lump sum that you pay to obtain your loan. It is generally expressed as a set percentage of your home’s purchase price. Lenders expect a down payment of at least 5 percent, and a down payment of 20 percent or more means that you will not have to pay CMHC mortgage insurance. When you subtract your down payment from your home purchase price, you get the base principal that your loan will consist of. Mortgage insurance, when required, is added to the base principal to calculate your total loan amount.
• Mortgage Insurance — Borrowers who cannot afford a down payment of at least 20 percent are required to pay mortgage insurance backed by the Canada Mortgage and Housing Corporation (CMHC). This insurance protects lenders in case mortgage holders default on their mortgages.
• Total Mortgage Required — The total mortgage required is the final amount of loan principal that you will finance.
• Amortization Period — The amortization period of your loan is the total length of time required to pay it back in full. Mortgage payments are ultimately calculated based on the number of months you need to pay off the loan.
• Mortgage Rate — Your mortgage rate is the interest rate percentage you pay on your loan. Each month, part of your loan payment goes toward your loan principal, and part of it goes toward interest. As you pay down your principal, the amount of your total mortgage payment that goes toward your principal increases, and the amount that goes toward your interest decreases. This is because there is less principal on which to calculate interest each month.
• Mortgage Type — The loan type is the sum total of conditions to which you agree when you sign for your loan term. It includes such things as whether your rate is variable or fixed and the number of years that your variable or fixed interest rate will be in force. Most Canadians have several different mortgage types over the amortization of their loan because most loan types and terms are shorter than what it takes to pay off their loan in full. The mortgage type also describes whether a loan is closed and has prepayment penalties or open with no prepayment fees.
• Total Mortgage Payment — The total mortgage payment calculated by our Canadian mortgage payment calculator represents the total amount of principal and interest that make up your mortgage payment each month.
• Frequency — Mortgage payment frequency indicates how often you will send a mortgage payment to your lender. Your options are once a month (monthly), twice a month (biweekly), or every two weeks of the year (accelerated biweekly). The more frequent your mortgage payment, the lower it will be. Accelerated biweekly mortgage payments ultimately cause you pay off your loan in fewer months than the amortization period represents. This can save you thousands of dollars in interest over the life of your loan. However, paying off your loan early can also lead to you breaking the loan term that is current at the time of pay off. If you do not have an open mortgage, this will likely cost you some extra fees, so be careful if you are on any kind of accelerated payment plan.
• Land Transfer Tax — The land transfer tax is the total tax that purchasers pay to the Canadian government when they buy a home. This is typically calculated as a percentage of the loan principal. The provincial land tax is the sum that goes to the provincial government, and the municipal tax is the sum that goes to the city or county government. If you are buying a home for the first time, some provinces and cities provide a tax rebate to make buying the home more affordable.
• Cash Needed — There are additional costs for title transfers, title history inquiries, and other lender services that are due at your loan’s closing. These costs are added to your required down payment to give you the amount of cash you need to bring to your loan’s closing.
• Monthly Expenses — In order to determine whether your final mortgage payment will be affordable, this portion of the calculator allows you to input your utility costs, car insurance premiums, and other totals that you must pay every month.
• Interest Rate Risk — You can calculate how much your payment will be if you choose a higher or lower interest rate by entering a different mortgage rate in the interest rate risk portion of our mortgage calculator.
• Amortization Schedule — The amortization schedule shows you how much of your payment goes to principal, interest, and other fees each month of your amortization period.
Closing Costs in Canada
The cost of buying a home also includes fees that are not typically added to the principal balance of your loan. Home inspection fees to determine the condition of your home, lawyer fees to handle the legal paperwork, land transfer tax, and other similar fees that you must pay at closing are your closing costs. If you do not have enough money saved to cover these costs, you will not get your loan; thus, it is essential that you plan for these fees ahead of time and set aside money to pay them.
Can I Afford My Mortgage Payment?
When you calculate mortgage payment, you should remember that your mortgage is not the only expense you have each month. You also need to pay for utilities, food, water, insurance, entertainment, and more. Experts recommend that your total mortgage payment be no more than 32 percent of the gross income that your household brings home each month. Establishing a budget and living by it consistently will help you afford your mortgage payment and even save money over time.
What About My Interest Rate Risk?
Over time, individuals with higher interest rate loans pay more in total interest than those with lower interest rate loans. Thus, getting the lowest rate possible is key. Fixed rates will give you payment stability, but they can be higher than variable rates, which change month to month based on your bank’s prime rate. Fixed rates are for the risk-adverse, and variable rates are good for those who want to take a chance on saving money on their loan. Understand, however, that variable rates can have unexpected and dramatic increases, which will alter your mortgage payment.
Calculate Your Monthly Mortgage Payments
Our mortgage payment calculator in Canada is the best tool available for estimating your mortgage payment. Use it today to get an accurate understanding of the cost of your future mortgage payment.