What is a mortgage payment calculator?

It’s all in the name! We used our dozens of years of combined experience in the mortgage industry to make a mortgage payment calculator that shows you exactly how much your mortgage payments would be for up to 4 different mortgage scenarios at once!

How we calculate your monthly payments

We built this mortgage payment calculator to include everything you would have to pay monthly for your mortgage, including amortization, mortgage rate, your down payment, required mortgage default insurance, and even land transfer tax (including rebates where applicable). And since you can choose from the best mortgage rates available on our website, you’ll know exactly what your payments would be!

The Parts of your Mortgage

Mortgage terms can be confusing, especially if you’re a first-time homebuyer. However, it’s actually not the hard to understand what everything means – so long as you use a mortgage payment calculator.

Amortization period

The amortization period is how long it will take to pay off your mortgage in full. In Canada, the normal amortization period is 25 years. That means that every year you pay off 1/25th of your mortgage. Don’t confuse paying off your mortgage with building equity though.

Equity is the difference between what your home is worth and how much mortgage is remaining. In the earlier years of your mortgage, your payments go more towards interest than principal; while you pay the same amount ever year, you start building equity slowly.

Case Study

For this house, you would pay $1,460 monthly. In the first month, $810 would go to interest and $650 would go to the principal. You want to pay more towards the principal, the actual amount of money loaned, because that’s how you build equity. Because only $650 goes towards increasing your equity, your remaining mortgage balance after the first month is $299,350.

The First Year

The Last Year

Total Cost of Mortgage = $438,109

Longer amortization periods have lower monthly payments because you spread the same debt over a longer period of time. Shorter amortization periods have higher monthly payments but cost less overall, as there’s less time to accumulate interest.
Here’s what that same house would cost with different amortization lengths.

The maximum amortization period for CMHC-insured mortgages is 25 years. If you want to extend your amortization period longer to take advantage of lower monthly payments, you would have to pay at least 20% as your down payment.
These numbers are for illustrative purposes only. As interest rates change over time, these are not indicative of the true cost of a mortgage. Read about the difference between amortization and mortgage terms here.

Interest Rate

The interest rate is a percentage that a lender charges you for borrowing money. Because interest rates are always a percentage, the more money you borrow, the more you have to pay back.
Interest rates are always displayed as an annual interest rate, so it can be a bit confusing when you’re trying to calculate your monthly payments, as interest is charged monthly.
To calculate your monthly interest rate, simply take your annual interest rate and divide it by 12.

3.24% ÷ 12 = 0.27%

If you were charged 3.24% on a $300,000 per month, you would owe $9,720. Instead, you’re only charged 1/12th of that, or $810.

Down Payment

In Canada you must have a down payment of at least 5% of the purchase price of a home. There is no such thing as a “zero-money-down” mortgage. The larger your down payment, the smaller your mortgage will be. That means you spend more up front, but less over the lifetime of the mortgage.
Increasing your down payment also has the benefit of reducing the premium on mortgage default insurance (CMHC insurance). The premiums are as follows:

You can read more about CMHC insurance here.              

There are many ways you can increase your down payment. The most traditional way is simply to save more money, but that also takes the longest. A much faster way is to get a gift from a friend or family member, as gifts aren’t taxed. However, some lenders don’t like seeing large gifts used as down payments because it increases the applicant’s debt-to-income ratio – a gift does not necessarily mean they will continue to receive financial support. Finally, you could get a down payment loan – but beware the additional cost of interest!        

Land Transfer Tax

The land transfer tax is provincially regulated; each province has different rules for it. Alberta and Saskatchewan don’t have a land transfer tax, while Ontario, B.C., and P.E.I all offer tax rebates for first-time homebuyers. For our land transfer tax calculator, click here.

Land Transfer Tax by Province

 

Check out our other mortgage calculators here:

Land Transfer Tax Calculator

CMHC Insurance Calculator

Affordability Calculator