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For the majority of Canadians, buying a home will be the biggest purchase they will ever make, and getting a mortgage is an essential part of this process. But how do you ensure that you get a mortgage that you can also pay in the long term? That’s where a mortgage payment calculator comes in.

Why Use a Mortgage Payment Calculator?

How much a mortgage will eventually cost you in the long run can be difficult to comprehend, 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. It also gives you a more accurate idea of ​​what you can afford.

Using a mortgage calculator to estimate your payments will give you a more realistic picture of the options available and help you assess mortgage products. In short, a mortgage payment calculator can help you see how a mortgage fits into your current financial plans, and how it could affect your future goals.

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How are mortgage payments calculated?

Entering a few key numbers into a mortgage payment calculator will give you a reliable estimate of your regular payment amount. These are the main variables that determine your mortgage payments:

Down payment amount: The amount of your down payment and the purchase price of your home determine the amount that you must borrow for your mortgage. (Note: You must have the minimum down payment required in Canada, which is tied to the home’s value.) Your mortgage amount is calculated by subtracting the down payment from the purchase price. If your down payment represents less than 20% of the purchase price, you’ll need to add the cost of standard mortgage insurance. Our calculator does this for you: all you need to do is enter the purchase price of the property and the amount of your down payment. Amortization Period: The number of years you need to fully repay the mortgage. The amortization should not be confused with the term of the mortgage, which is the period that your mortgage contract is in effect. Buyers usually complete several terms before paying off the loan. Borrowers with less than 20% down payments must have mortgages that will amortize over 25 years or less. Those with more than 20% also have access to 30-year mortgages. Interest rate: The interest rate that you pay on any outstanding mortgage balance. Your rate depends, among other things, on developments in the economy and the conditions of your mortgage, for example whether you opt for a fixed or variable rate. Payment Frequency: The interval at which you pay your mortgage. The above calculator allows you to select monthly, biweekly or accelerated biweekly payments; however, borrowers can also sometimes choose from semi-monthly, weekly, and accelerated weekly payment options. The frequency of your payments affects the number of payments you make per year and the size of each payment. It also affects how much interest you pay over the life of the loan. The more often you pay, the faster you will pay off the debt.

To calculate your mortgage payments, enter this information into the mortgage amortization calculator. (The calculator automatically displays the best rates available in your area, or you can enter your own rate.) The calculator then displays monthly payments in four different scenarios, based on the information you provide. You can change any of the variables to see how your normal mortgage payment would be affected.

If your down payment represents less than 20% of the purchase price, the cost of mortgage default insurance is automatically calculated and included in your regular mortgage payment.

How to Calculate Your Mortgage Payments Manually

When you need to quickly calculate what your mortgage payment will be, you should probably use a mortgage payment calculator. However, if you prefer to write things out, or if you just want to understand the math behind your mortgage payments, you can use the formula below:

Monthly Payment = P x (I x (1 + I)^N ) / ((1 + I)^N – 1)

P = Mortgage principal
I = Monthly Interest
N = Number of payment terms

This post MoneySense Toolkit: The Mortgage Payment Calculator

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