How does a mortgage payment calculator work?
So, you’re ready to start looking for your dream home. But before you make an offer, you’ll need to answer an important question: “What will my mortgage payment be?” Our calculator is designed to help you figure that out, based on the interest rate you’re paying, the size of your mortgage and your down payment (plus a few other factors).
When you’re getting a mortgage, it’s important to understand how much you can afford to pay every month. If you’re buying a home or property in Canada, use our mortgage payment calculator as your guide to budgeting for your purchase. It can help you figure out how much of a down payment you need, whether you need a fixed or variable mortgage, and how much you can actually afford to pay for your home.
Smart budgeting begins with the right tools. Our mortgage calculator is one of them.
How to use our mortgage calculator
To use LowestRates.ca’s down payment and mortgage calculator, you’ll need to plug in a few different figures. Here are the numbers you’ll need to have on hand:
- Asking price. This is the purchase price of the property or home you’re buying.
- Down payment. This is the amount of money you pay upfront toward the purchase price.
- Mortgage insurance. If your down payment is less than 20% of the home’s purchase price, you’ll be required to get mortgage default insurance. Based on the asking price and down payment, our calculator will automatically show you the cost of mortgage insurance.
- Amortization period. This is the total number of years it will take to pay off your mortgage. In Canada, the maximum amortization period is 30 years. If you’re required to get mortgage insurance, the longest amortization period you can choose is 25 years.
- Interest rate. This is the percentage of interest you’ll pay on your mortgage balance. Our calculator lets you choose actual mortgage interest rates available from providers, or you can enter a custom rate.
- Payment frequency. This is how often you want to make mortgage payments. You can use this page as a weekly mortgage payment calculator, monthly mortgage payment calculator, biweekly mortgage payment calculator, or yearly/annual mortgage payment calculator, all in one place.
How to lower your mortgage payments
If you use our mortgage calculator and find the cost of payments is too high, there are a few things you can do to lower how much you pay each month.
Increase your down payment: The more cash you can afford to pay up front, the lower your mortgage balance will be.
Choose a longer amortization period: A longer amortization period means you can stretch your payments out over a longer period of time. The total lifespan of a mortgage can be up to 30 years, or up to 25 years if you have an insured mortgage. For example, you can use our mortgage payment calculator to compare a 15-year amortization period vs. a 20-year amortization period.
Get a lower mortgage rate: Even a difference of less than 1% can save you thousands of dollars in interest charges over the life of your mortgage. LowestRates.ca makes it easy to compare mortgage rates from 75+ Canadian banks and brokers, and can connect you with a mortgage broker to secure your rate.
Buy a cheaper home: It might seem obvious, but if you’re playing around with the mortgage calculator and the numbers consistently seem too high, you might need to adjust your budget and look for a home with a lower asking price.
How to pay off your mortgage sooner
If you want to be mortgage-free sooner rather than later, there are a few things you can do to pay off your mortgage faster.
Choose an open mortgage: An open mortgage allows you to make extra payments on your mortgage or pay it off early without any kind of financial penalty. For the convenience they offer, open mortgages usually have higher interest rates.
Negotiate prepayment privileges: Depending on the type of mortgage, some lenders will allow you to make increased or additional mortgage payments on top of your regular payment schedule. Usually, it’s up to a certain amount or percentage each year. Each lender has its own terms.
Shorten the amortization period: In Canada, a mortgage amortization calculator will go up to a maximum of 30 years (25 years if you have an insured mortgage). Let’s say you put 30 years into the mortgage payment calculator and discover the payments are pretty reasonable. If you want to pay off your mortgage faster, try a shorter amortization period (like 20 or 25 years) and see whether you can still afford the payments.
Using a mortgage payment calculator will show how much you can expect to pay each month.
Why get a mortgage online?
Using LowestRates.ca allows you to view mortgage rates from a number of different lenders. This saves you the effort of having to call different banks and compare their rates to get the best deal. Using our website saves you both time and money.
Most financial institutions rarely advertise their best mortgage rates. You may need to visit a branch and negotiate to see their most competitive offer. Our website eliminates that step. We ask the banks and brokers listed on our website to show us their best rates. Lower rates help increase their business, while helping you spend less — everyone wins.
Your mortgage calculator FAQs, answered.
What is a down payment?
For a big-ticket purchase like a house, the bank requires some cash upfront in exchange for the financing they’ll provide. This, in a nutshell, is a down payment.
But what’s the point of a down payment? From the bank’s point of view, it shows you’re serious about paying them back. It’s also a form of collateral for loaning you money. The larger the sum, the sooner you’ll be able to own your home outright. A sizable down payment might also give you more leverage with the bank — you might be able to negotiate some of the terms of your mortgage (the interest rate, for example).
The old rule of thumb was to have 20% of the purchase price to offer as a down payment — but that’s only mandatory for properties worth $1 million or more.
In today’s market, you can make a down payment for as little as 5% of the purchase price on a property valued $500,000 or less. For properties valued above $500,000, you pay 5% on the first $500,000 and 10% on the remainder.
What is mortgage insurance?
Mortgage insurance isn’t a safety net for you, the homeowner. It’s meant to protect your lender in case you stop making payments or default on your mortgage.
Mortgage insurance is mandatory for homeowners who make down payments of less than 20%. Mortgage insurance can be purchased by the government-run Canada Mortgage and Housing Corporation (CMHC) or private insurers Sagen and Canada Guaranty.
As for how your premium is calculated, it’s anywhere between 0.60% and 4% of your down payment — the larger your down payment, the less you’ll pay in mortgage default insurance premiums.
What is an amortization period?
An amortization period refers to the total length of time it will take to pay off a mortgage. In Canada, the maximum period is 30 years if you have a down payment of at least 20%. If your down payment is less than 20%, the maximum amortization period is 25 years. With each mortgage payment, you shave a bit off the principal and the interest.
In the beginning, most of your payments go towards interest payments and a tiny fraction goes towards the principal. As you near the end of the schedule, most of your payments go towards the principal.
If you stretch out your amortization period to the maximum time frame, you’ll end up paying more interest than principal — but your monthly payments will be smaller.
The reverse applies if you choose a shorter amortization period: the payments are larger each month, but you’ll save on interest costs.
What is a mortgage term?
A mortgage term is the length of time a borrower must abide by the provisions of their mortgage agreement. This includes the interest rate they are paying, their payment schedule, and other details such as prepayment options and additional fees. Mortgage terms are often offered anywhere from six months to 10 years, with five years being the most popular choice in Canada.
What’s the difference between a fixed rate and variable rate mortgage?
The difference between a fixed and variable rate mortgage is how the interest on the loan is calculated during a single term. A fixed-rate mortgage has an interest rate that does not change, even if the bank decides to raise or lower its interest rate on new mortgages. However, with a variable-rate mortgage, your interest rate will fluctuate with the market. That means a borrower with a fixed-rate mortgage will have the same payment for their entire term, while someone with a variable-rate mortgage will pay different amounts depending if their rate moves up or down. You can choose to input fixed or variable mortgage rates into our payment calculator.
How do land transfer taxes work?
Paying a land transfer tax is typically required by the buyer upon the closing of a real estate transaction. In most of Canada, this tax is levied by the provincial government. Toronto is the exception: it’s the only municipality that levies additional land transfer taxes on top of the provincial tax. The tax is normally based on the amount paid for the land, though it can also be based on the fair market value in very specific situations. First-time home buyers are eligible for a refund on all or part of the tax.
What other mortgage calculator tools exist?
There are even more tools at your disposal that can help you get a more complete view of your finances as a homeowner.Amortization schedules
An annual amortization calculator will show you what your payments will be in the future — the distant future. Amortization schedules can show you how much you’ll pay each month for the entire life of your mortgage, which for most people is 25 years. This tool also breaks down what you pay in interest and how much you paid towards the principal. When you first get your mortgage, most of your payments go towards paying interest. Near the end, most of your payments go towards the principal.
Your mortgage broker can provide you with an amortization schedule and there are many calculators online you can use as well.
Property tax calculator
A lot of homeowners wonder, “What is my mortgage payment with insurance and taxes?” There are calculators that can answer those questions for you.
LowestRates.ca’s mortgage payment calculator displays what your insurance premium will be if you enter a down payment lower than 20%.
Most municipalities in Canada have online resources to help homeowners estimate their annual property taxes. Find a property tax calculator on your city’s website.