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If you’re thinking of purchasing a house, make sure to crunch the numbers to determine how much mortgage you can qualify for and how much your mortgage payments will be. 

Your mortgage amount ultimately comes down to the price of the home, your down payment, the loan term, and the interest rate. But the exact amount that your mortgage will cost you also depends on other factors, like the interest rate and amortization period. Given these variables, mortgage amounts in Canada can fluctuate greatly. 

To give you an idea of how much a home loan might cost you, let’s look at a $250,000 mortgage and all the fees and expenses that come with it

Key Points

  • The cost of a $250,000 mortgage depends on various factors, including your interest rate, amortization period, and mortgage term.
  • Home buyers should play with various calculations to see how their mortgage payments and the overall cost of their home loan can change based on variations in the above-mentioned components.

What Would Your Payments Be For A $250,000 Mortgage?

The size of your mortgage payments depends on the mortgage terms you qualify for, including: 

To illustrate how your mortgage payments may be on a $250,000 mortgage, let’s see how different interest rates and amortization periods can affect these payments. For each example, we’ll assume a 5-year fixed-rate term:

How Interest Rates Can Impact Your Mortgage Payments

Example 1: 4.25% interest vs. 6.75% interest (assuming a 25-year amortization period):

Interest RateMonthly Mortgage Payment
4.25%$1,349.15
6.75%$1,712.62

In the above example, a rate difference of 1.50% can make a huge difference in the cost of your monthly mortgage payments when all other components of your mortgage remain the same. In this case, you’re paying $363.47 more per month on a 6.75% rate compared to a 4.25% rate.

How Your Amortization Period Can Impact Your Mortgage Payments

Example 2: 15- vs. 25-year amortization period (assuming an interest rate of 5.25%):

Amortization PeriodMonthly Mortgage Payment
15 years$2,002.27
25 years$1,489.80

In this scenario, you would pay $512.47 less per month by opting for a longer-term amortization period. Extending your loan an extra 10 years means you can stretch out your mortgage over a longer time frame, so each payment will be smaller compared to a more condensed amortization. However, longer-term amortization periods mean you’ll pay more interest overall, which we’ll get into later.

How Much Interest Would You Pay On A $250,000 Mortgage? 

Using the same example as above, let’s determine how much interest you could be charged on a $250,000 house if it had a common 5-year closed term and monthly payments. In this case, the amount you’ll pay is based mainly on your interest rate and amortization period.

Example 1: 15-year amortization:

Interest Rate Interest Paid Over 5 YearsTotal Interest Paid Over 15-Year Amortization
4.0%$43,228.36$82,117.43
5.0%$54,421.92$104,655.71
6.0%$65,741.85$127,947.26

Example 2: 25-year amortization:

Interest Rate Interest Paid Over 5 YearsTotal Interest Paid Over 25-Year Amortization
4.0%$46,537.83$144,515.15
5.0%$58,509.52$186,203.74
6.0%$70,562.76$229,854.97

You’ll notice two things from the above charts. Firstly, the amount of interest you pay over the entire life of the loan is roughly double with a 25-year amortization period versus a 15-year one. Secondly, just a slight increase in the interest rate means you’re spending tens of thousands of dollars more in interest over the life of your loan.

So, both the interest rate and the length of your amortization play important roles in how much you’ll pay toward interest on your $250,000 mortgage.

Do You Have To Pay CMHC Mortgage On A $250,000 Mortgage? 

Mortgage default insurance — also commonly referred to as CMHC insurance — is mandatory for any down payment that’s less than 20%. This type of insurance protects your lender if you default on your payments, though you’re the one who has to pay for it. Luckily, it can also help you qualify for a mortgage with a minimum down payment starting at 5%. 

Your mortgage default insurance premium depends on your down payment. The premium rate increases the lower your down payment is, according to the 

Down Payment AmountCMHC Insurance Rate
15% to 19.99%2.80%
10% to 14.99%3.10%
5% to 9.99%4.00%

To illustrate how much your premiums will cost you based on different LTVs, let’s use an example based on the purchase of a $250,000 home: 

Home Price Down PaymentPremium on Mortgage AmountMortgage Default Insurance AmountTotal Mortgage Amount
$312,500020% ($62,500)N/A$0$250,000
$294,11715% ($44,117)2.80%$7,000$257,000
$277,77710%($27,777)3.10%$7,750$257,750
$263,1575% (13,157)4.00%$10,000$260,000

As you can see, the bigger your down payment, the less you’ll pay in mortgage default insurance on the same home purchase price. 

Do note, that lenders may still take out CMHC insurance on your mortgage for down payments of 20% or more, depending on your situation. For instance, if the property is in certain rural areas or doesn’t meet minimum guidelines, then mortgage insurance may apply.

How Much Income Do You Need To Qualify For A $250,000 Mortgage?

Although $250,000 is a relatively low mortgage amount these days given current home prices, it’s still a hefty sum. This is especially true with the current high mortgage interest rates. 

The personal income you’ll need to qualify for a $250,000 mortgage can vary according to your current financial situation and lender’s requirements. Mostly, they’ll want to confirm that you’re steadily employed and earning enough to cover any mortgage payments, interest, and fees that may come up over the life of your loan. 

Mortgage Stress Test Required

Depending on the purchase price of the home and your down payment amount, you’ll need to pass the mortgage stress test. This test requires you to qualify at the minimum qualifying rate, which is currently 5.25% or the contracted rate plus 2 points, whichever is the higher.

Debt Service Ratio Restrictions 

Ultimately, your lender will want to calculate your debt service ratios, which measure the share of your monthly income dedicated to paying your current monthly debt. Ideally, this ratio should be low. If this ratio exceeds the lender’s threshold, you could be turned down for a mortgage. Ultimately, the income you need to qualify for a $250,000 mortgage depends on how much debt you currently carry.

Programs Available To Help You With A $250,000 Mortgage

To help you cover the cost of a $250,000 mortgage, several government-backed programs are available:

First-Time Home Buyers’ Amount

If you’re a first-time home buyer, you may qualify for the First-Time Home Buyers’ Amount. This non-refundable tax credit provides up to $1,500 when you file your taxes.

GST/HST New Housing Rebate

If you’re buying a newly constructed home or are substantially renovating a home, you may qualify for the GST/HST New Housing Rebate. This rebate allows you to get back some of the GST or the federal component of the HST you paid for a new or extensively renovated home. The maximum rebate you can receive depends on the province you live in. 

Home Buyers’ Plan (HBP)

The Home Buyers’ Plan lets you borrow up to $60,000 from your Registered Retirement Savings Plan (RRSP) tax-free to put towards the down payment on your first home. You’ll need to repay the borrowed funds within 15 years.

First Home Savings Account (FHSA)

The First Home Savings Account helps Canadians under 40 save up to $40,000 to buy their first home. This account is both tax-free and tax-deductible. 

Final Thoughts

The overall cost of a $250,000 mortgage depends on several factors. For instance, your interest rate, amortization period, and LTV will determine the cost of your mortgage. Review various scenarios and calculations to see how much you can expect to pay for a $250,000 mortgage and budget accordingly. 

$250,000 Mortgage FAQs

How much interest would I pay on a $250,000 mortgage?

The amount of interest you pay would depend on the interest rate you qualify for, your payment frequency, and your amortization schedule. For example, if you qualify for a $250,000 mortgage with an interest rate of 4% (amortized over 25 years and paid monthly), you’d pay approximately $144,515.15. Similarly, if your rate increases to 6%, you’d pay approximately $229,854.97. Most people will amortize their mortgages at 25 or 30 years due to mortgage qualification rules and affordability.

Should I put a small or high down payment? 

A larger down payment will reduce the amount you have to borrow, which means smaller monthly mortgage payments. However, this may also potentially drain your savings and tie up much of your capital in your home. 

Where can I get a $250,000 mortgage in Canada?

You can get a $250,000 mortgage from a bank, credit union, or alternative mortgage lender. If you have good credit and strong finances, you may be able to qualify with a bank at an affordable rate. However, if you have bad credit or a low income, you may have better luck with alternative mortgage lenders. They offer more flexible requirements, making it easier to qualify for a mortgage. 
Bryan Daly avatar on Loans Canada
Bryan Daly

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.

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