Buying a home in Canada? Use our mortgage calculator to find out how much it'll cost you per month. A variety of factors can impact your monthly payment and we've taken into account all the moving parts, from your amortization to your mortgage rate.
How does the mortgage calculator work?
When you’re getting a mortgage, it’s important to understand how much you can afford to pay every month. Our mortgage 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).
You should use our calculator as your guide to budgeting for your mortgage. It can help you figure out how big of a down payment you need, whether you need a fixed-rate or variable-rate 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.
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.
What’s the difference between getting a mortgage from a bank versus a broker?
On the surface, there is no difference between getting your mortgage from a bank or a broker. Brokers simply shop around themselves for their loans to find you the best rate. Their mortgages offer the same backing and security that loans from the major banks do.
One advantage banks have over brokers, however, is that you may have a pre-existing relationship with your bank. It can be convenient to have all your financial products in one location. But in exchange for that convenience, you often end up paying a premium for some of those products. Brokers often offer better mortgage rates than the major banks, so it’s important to shop around.
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 sizeable 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 provided by the Canadian Mortgage and Housing Corporation (CMHC) and is mandatory for homeowners who make down payments of less than 20%.
As for how your premium is calculated, since 2017, it’s anywhere between 0.60% and 4.50% of your down payment — the larger your down payment, the less you’ll pay.
What is amortization?
An amortization period refers to the length of time it will take to pay off a mortgage. In Canada, the maximum period is 25 years (prior to 2012, it was 30 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 you will 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 a 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.
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, with Toronto being the exception: it’s the only municipal government that levies an additional land-transfer tax 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.
Buying a home? Read our in-depth guide to learn more.Learn More