Mortgage Payment Calculator

Are you thinking about buying a home? When taking out a loan, especially a mortgage, you need to prepare well. There are several aspects you should consider: the down payment, the amortization schedule, the interest rates, and suchlike.

You usually get all the necessary information at your first meeting with a lender. But why not get ready for it? Using an online mortgage calculator enables you to check out your options before you talk to your lender. Hence, you know what you can expect them to offer.


What’s a Mortgage Calculator?

A mortgage is a type of loan typically used for buying a home. It’s a secured loan because the home you want to purchase is used as collateral. A lender has the right to claim the collateral in case you fail to pay off your debt. But when you make your last payment, the home is entirely yours.

An online mortgage calculator is a handy tool that can help you prepare for your first meeting with a lender. It’s good to know your options, and from there, you can even negotiate better conditions. With a mortgage calculator, you can go through those options in just a few clicks. You can modify the variables to see what scenario works best for you.

How to Use a Mortgage Calculator

To use a mortgage calculator, you need to know the following details:

  • The price of the real estate you’re planning to buy.
  • The amount of money you can afford as a down payment (or the amount your lender requires).

Yes, that’s all! A mortgage calculator will provide you with the rest of the information. Calculating mortgage payments might have caused headaches in the past, but today the whole process is much simpler thanks to online calculators.

Let’s give you an example.

Say you want to buy a $200,000 home. The required down payment percentage is 5.00% of the total real estate value. You enter this information into the calculator and select a 20-year-long amortization period – the number of years over which you’ll be paying off the loan.

You get the following results:

  • You need $10,000 for a down payment.
  • You need $7,600 as mortgage default insurance (also called the CMHC insurance – lenders use it to protect themselves in case they default on the mortgage).
  • Your total mortgage amount will be $197,600 (it’s the price of your desired home, plus the CMHC insurance, less the down payment).
  • Your monthly payment is likely to be $1,118 at a 3.24% rate.
  • Your land transfer tax is likely to be $3,450 (Are you a first-time homebuyer? In Canada, you get the land transfer tax money back if it’s the first time you’re buying a home – make sure you take this into account when using a calculator).

When using this calculator, you can select different rates and amortization periods. That’s why this tool is useful and a real time-saver – you can compare different rates and lenders from the comfort of your home, and choose the one that suits you best. No wasting your time waiting in lines and talking to multiple lenders and mortgage brokers.

Note that we’re saying, “is likely to be”. Online calculators give you approximate numbers, but you’ll know for sure when you meet with a lender and get an official offer. Use online calculators just for orientation.

Mortgage Amortization

The amount of time taken to completely pay off you mortgage is known as the “amortization period.” Your down payment will determine the maximum amortization period you’re given. If your down payment is lower than 20 percent of the price of your home, the maximum amortization period is 25 years.

If your down payment is less than 20 percent this is regarded as a high-ratio mortgage and it must be insured. This type of policy is called mortgage default insurance. It is also popularly referred to as CMHC insurance. Your premium safeguards the institution you borrow from in the event of any default. Canada Mortgage and Housing Corporation and of course, your lender, want to be sure you will manage your money well enough to pay your loan within the agreed period of 25 years, especially considering the additional risk a high-ratio mortgage carries.

You can get a conventional mortgage once you make a down payment of 20 percent of the purchase price. In this case, you would not need CMHC insurance. It also means you can spread out your payments over a longer amortization period – most lenders will give you a maximum of 30 years. Since you will pay the mortgage off over a longer period of time, you will pay less each month, fortnight, or week. The disadvantage of the long amortization period is that you will pay more interest over the life of the mortgage.

Ways to Shorten Your Amortization Period

If you’re in the financial position, you should pay off your loan before the 25-year period is up, since you can get prepayment privileges from most lenders. These privileges let you do one of two things: either pay a lump sum towards the loan or make higher monthly payments.

Data from the Canadian Association of Accredited Mortgage Professionals shows that 35 percent of Canadians made use of prepayment privileges offered on their mortgage loans in 2012. Speak to your lender and find out precisely what prepayment privileges your loan carries. Your lender can impose expensive penalties if you go beyond the privileges they set out.

Are there advantages to a long amortization period?

Some skilled investors may opt a longer amortization period, and invest the difference in payments for a higher return. This approach is now more popular because of lower interest rates banks are currently offering on mortgages.

Amortization Period – The Long and Short of It

Amortization Period – The Long and Short of It. Shorter is better when choosing an amortization period for your mortgage.  Your amortization period is the number of years it will take you to pay off the full balance of your mortgage and not to be confused with the mortgage term. A longer amortization period is good if you want to buy a house sooner and have lower mortgage payments and by increasing the years on the term can allow you to do that and for some can be the difference between purchasing and not purchasing a home. If your down payment is less than 20% the standard period has been 25 years, but you can save money and pay off your mortgage sooner by shortening that period.  

Want to know why Shorter’s Better?

Shortening the mortgage amortization period can save thousands off the interest you pay, plus you own your home sooner. If you’re in a position to pay more per mortgage payment, a shorter amortization would be ideal. By choosing a shorter term, it is better as an investment as this can be the most important investment you will make in your life. In the end, you will have financial wellness and peace of mind. Your home should be your security, your retirement security, and future.

You can even change your amortization period.  Maybe you’ve chosen a longer  amortization period, say 25 years based on circumstances, but now your financial situation has improved, you can change the amortization period and it does not mean you have to stay with it throughout the life of your mortgage.  It’s  good financial sense to re-evaluate your amortization every time you renew your mortgage and if you are in a better position, choose shorter.

If you want to know just how much money you can save by choosing a shorter amortization period , check out our Mortgage Payment Calculator .   We have more money saving best mortgage rates you can compare if you’re thinking of refinancing or renewing your mortgage.  

If you need more information, contact best mortgage brokers Canada at

Can I Lower My Mortgage Payment?

Your monthly payments depend on your income, credit score, and other factors that your lender considers. There are ways to lower your monthly payments if you believe they’re too high for your current budget.

When taking out a loan, you can see your amortization schedule. This schedule shows all your monthly payments during the whole amortization period. You can see the portion of the principal and the interest for each monthly payment and know precisely how much you’re paying for what.

Your mortgage payment can be lower if:

  1. You increase the down payment. The higher this sum is, the less money you need to borrow from the lender. Your overall interest will also decrease, and your monthly payments may fit better into your budget.
  2. You find a better interest rate. Note that the APR and monthly interest rate aren’t the same. The APR (Annual Percentage Rate) includes some other loan costs, such as the origination fee, broker fee, closing costs, or prepayment fee.

The monthly interest rate is calculated based on the principal, and it can be variable or fixed. The variable interest rate depends on the market. It can vary from month to month – from being very low to skyrocketing on occasions. The fixed interest rate is less risky, given that you’re paying the same amount through the whole amortization period.

  1. You choose a variable interest rate. However, this option carries certain risks. While it’s true that the interest can drop and make your monthly payments lower, it can also suddenly increase and make it impossible for you to keep up with paying off the debt.
  2. You prolong the amortization period. This is logical: if you choose to pay off the debt over the next 30 years instead of 20, your monthly payments will be lower. However, keep an eye on the interest here, as your overall mortgage cost may become higher.

Also, in Canada, you can pay off the debt in 35 years at most. If your down payment is less than 20%, your maximum amortization period is 25 years.

  1. You refinance your mortgage. Borrowers with good credit scores can refinance their mortgages at lower rates and save lots of money this way.
  2. Drop the mortgage insurance. It’s mandatory when your down payment is less than 20% of the real estate value. Still, as soon as you repay that percentage of your debt, you can ask the lender to quit the insurance. This payment is just an additional cost when you don’t have enough money to make a larger down payment.

You can use an online mortgage calculator to check each of the options and determine how much your monthly payment would be in each case.

Calculate Your Options

Calculating your monthly mortgage payments when buying a home has never been easier. You don’t need to know more than how much your dream home costs and how much you can afford as a down payment. After selecting a suitable amortization period, you’re just a click away from comparing your options.

Online calculators give you a chance to improve your financial literacy and save you time. You’ll show up for a meeting with a lender well-prepared, and you’ll be able to discuss the rates and get the best possible offer.

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