If you’re ready to buy a home, have you crunched the numbers to see how much you’d have to spend? More specifically, have you considered how much your monthly mortgage payments would be based on home prices and financing requirements?
Given the cost of homes these days, it’s not uncommon for Canadians to carry sizable mortgages, such as $700,000. Using this hypothetical mortgage amount, let’s take a closer look at what your mortgage payments would be and all the costs associated with your home loan.
Key Points
- The cost of a $700,000 mortgage is determined by several factors, including the interest rate, amortization period, and loan term.
- The total amount of interest you pay over the life of a $700,000 mortgage can vary significantly based on the amortization period, payment frequency and interest rate.
- Your mortgage payments on a $700,000 mortgage will also include mortgage default insurance if you make a down payment less than 20% of the purchase price.
What Would Your Mortgage Payments Be For A $700,000 Mortgage?
If you’re looking to take out a mortgage of $700,000, your mortgage payments will vary depending on a few factors, including the following:
- Down payment
- Payment frequency
- Amortization period
- Interest rate
To help illustrate how much your mortgage payments will be for a $700,000 mortgage, we’ve outlined a few variations. These are based on different interest rates and amortization periods, assuming 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 Rate | Monthly Mortgage Payment |
| 4.25% | $3,777.62 |
| 6.75% | $4,795.35 |
As you can see, even a difference of 1.5% in interest can mean significant savings in mortgage payments. In this case, you would pay $1,017.73 less per month if you could snag a rate of 4.25% versus 6.75%.
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 Period | Monthly Mortgage Payment |
| 15 years | $5,606.36 |
| 25 years | $4,171.43 |
In this example, you would pay $1,434.93 less per month with a longer-term amortization period. By stretching out your mortgage over a longer period, each payment will be much smaller compared to a shorter amortization. Keep in mind, though, that you’ll pay a lot more in interest over the life of the loan if you go with a longer amortization period.
How Much Interest Would You Pay On A $700,000 Mortgage?
The amount you’ll pay in interest over the life of your loan will depend on:
- The length of your amortization period
- Your payment frequency
- The interest rate you pay
Let’s illustrate how much interest you’d pay on a $700,000 mortgage based on 15- and 25-year amortization periods at varying rates and monthly installments:
| Rate | Interest Paid Over 15-Year Amortization Period | Interest Paid Over 25-Year Amortization Period |
| 1.5% | $81,871.58 | $139,405.97 |
| 2.0% | $110,340.49 | $189,247.55 |
| 2.5% | $139,388.16 | $240,729.08 |
| 3.0% | $169,007.38 | $293,815.55 |
| 3.5% | $199,190.37 | $348,467.70 |
Choosing a shorter amortization period might mean higher mortgage payments, but you’ll pay significantly less in interest over the life of your loan. Plus, you’ll be mortgage-free a lot sooner.
How Much House Can You Afford With A $700,000 Mortgage?
How much house can you afford with a $700,000 mortgage? The amount depends on how much you put down as a down payment.
In Canada, the minimum down payment amount is 5% on home prices of $500,000 and under. But for home prices that exceed $500,000, the minimum down payment amount required takes a tiered approach:
| Home Price | Minimum Down Payment (% of Purchase Price) |
| Up to $500,000 inclusive | 5% |
| $500,000 – $999,999 | -5% of the first $500,000 -10% for the amount exceeding $500,000 |
| $1 million and over (Effective December 15, 2024, the home price cap for insured mortgages will increase to $1.5 million) | 20% |
The following table shows a few examples of different home prices you may afford based on different down payment amounts along with a $700,000 mortgage:
| House Price | Down Payment Amount (%) | Down Payment Amount ($) | Mortgage Amount |
| $750,000 | 5% on the first $500,000 10% on the remaining $200,000 | $50,000 | $700,000 |
| $777,777 | 10% | $77,777 | $700,000 |
| $823,529 | 15% | $123,529 | $700,000 |
| $875,000 | 20% | $175,000 | $700,000 |
Should You Put A Higher Or Smaller Down Payment?
You can always put more towards your down payment than just the minimum. In fact, you may be better off doing so, for a few reasons:
- Lower Mortgage Amount – A higher down payment means a lower loan amount, which usually translates into lower monthly payments.
- Better Rates – A higher down payment amount lowers the lender’s risk. In turn, this means a potentially lower interest rate, which can save you a ton of money over the long run.
- Avoid Mortgage Default Insurance – A down payment of at least 20% of the purchase price of the home means you can skip the mortgage default insurance premiums. This will save you even more money.
How Much Mortgage Loan Insurance Would You Need If You Made The Minimum Down Payment?
Down payments of less than 20% of the purchase price of a home mean mortgage default insurance is required. This type of insurance is meant to protect lenders from mortgage defaults and allow borrowers to purchase a home with as little as 5% down.
The following chart illustrates how much your premiums will cost you based on different down payment amounts:
| Down Payment Amount | Premium on Mortgage Amount |
| 15% | 2.80% |
| 10% | 3.10% |
| 5% | 4.00% |
Note: Lenders may still take out CMHC insurance on your mortgage for down payments of 20% or more.
Using the previous example as an illustration, the minimum down payment you would need to get a $700,000 mortgage would be $48,537. This means you could buy a home for $748,537. However, because your down payment is less than 20% of the purchase price, mortgage default insurance would apply.
In this case, you would be charged a premium rate of 4.0% on the $700,000 mortgage, as per the above chart. This comes to $28,000 ($700,000 x 4.0%). As such, the total mortgage amount would be $728,000.
How Much Income Do You Need To Qualify For A $700,000 Mortgage?
Lenders use income to determine your eligibility for a $700,000 mortgage. You’ll need to afford your monthly mortgage payments while still paying your existing bills.
So, how much income do you need to qualify for a $700,000 mortgage?
Let’s illustrate using the following variables (assuming no mortgage default insurance is needed):
- 25-year fixed mortgage
- 5-year term
- 6.75% interest rate
In this scenario, you would have to qualify at 8.75% (6.75% + 2%) as part of the mortgage stress test. With this test, you need to qualify at your contact rate + 2% (since this is higher than the current minimum qualifying rate of 5.25%).
Given these variables, your monthly mortgage payments (including principal and interest, and at the inflated 8.75% rate) would be $5,681.30. That’s $68,176 annually on mortgage payments alone.
It’s worth noting, however, that you can amortize to 30 years if you put down at least 20%. In this case, your monthly payments may be slightly lower since you’re spreading your payments over a longer period of time.
If property taxes and home insurance cost you another $7,500 per year, for instance, that brings your yearly total housing costs to $75,676.
What Income Do I Need To Earn?
According to the Canada Mortgage and Housing Corporation (CMHC), you shouldn’t spend more than 39% of your average gross monthly income on housing costs. In other words, you shouldn’t spend more than roughly one-third of your annual income on housing.
Using the above example of $75,686 in annual housing costs, you’d need an income of at least $194,041 ($75,686/0.39) to qualify for a $700,000 mortgage.
Find Out The Cost Of Other Mortgage Amounts
Programs Available To Help You Pay A $700,000 Mortgage
The federal government offers a few programs designed to help buyers afford a $700,000 mortgage to buy a home:
Home Buyers’ Plan (HBP)
The Federal Government’s Home Buyers’ Plan (HBP) lets first-time home buyers borrow up to $60,000 from their Registered Retirement Savings Plan (RRSP) tax-free. The money can be put toward a down payment on a home but must be repaid within 15 years.
First-Time Home Buyers’ Amount
If you or your spouse/common-law partner have never owned a primary residence, you may qualify for the Home Buyers’ Amount. This non-refundable tax credit provides a $1,500 tax credit to reduce your taxable income and therefore cut down on the taxes owed.
GST/HST New Housing Rebate
If you build or buy a new home, you’ll pay GST or HST on the purchase price. The GST/HST New Housing Rebate provides a refund to recover a portion of the amount spent on these taxes. The maximum rebate amount you can get depends on where you live.
First Home Savings Account (FHSA)
The First Home Savings Account is a special savings plan that allows first-time buyers to save up to $40,000 in total ($8,000 per year) to purchase a home. Once you are ready to buy a home, you can withdraw these funds tax-free.
Final Thoughts
A $700,000 mortgage can take different forms in terms of mortgage payment amounts. Depending on the interest rate, amortization length, payment frequency, and mortgage default insurance premiums, your mortgage payment amounts and the overall cost of your loan can vary significantly.
$700,000 Mortgage FAQs
Can I repay my $700,000 mortgage early?
How can I get the lowest rate on a $700,000 mortgage?
Are there other costs associated with a $700,000 mortgage?
Note: Loans Canada does not arrange, underwrite or broker mortgages. We are a simple referral service
