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Knowing what your mortgage payments might look like and how much you can afford in a home purchase is a crucial first step in the home-buying process. But crunching the numbers doesn’t have to be confusing, thanks to online mortgage calculators.
Within seconds, you’ll see how much home you can afford, what your payments might look like, and how interest adds up over time.
Key Points:
- A mortgage calculator can be a handy tool to help you determine how much you can afford in a home purchase and what your monthly payments might look like.
- Several factors affect your mortgage affordability, including your income, debt, credit score, down payment, interest rate, and loan term.
- Keep in mind that while mortgage calculators may provide solid estimates, your actual mortgage payments may be slightly different due to lender fees (when using alternative or private lenders) or changes in interest rates.
How Our Mortgage Calculator Can Help You Plan For The Future
When you apply for a mortgage, your mortgage payments will be based on a lot more than just your loan amount and the interest rate. There are so many factors involved in coming up with exact mortgage payment amounts that it can be extremely challenging to figure it out manually.
That’s exactly why we’ve created this mortgage calculator: to help you determine exactly how much you can expect to pay in monthly mortgage payments, overall interest throughout the life of the loan, and the total loan amount owed when all is said and done. Just plug in a few numbers to get the answer you need to help make sure you’re ready to become a homeowner.
How To Use The Mortgage Calculator
Using an online mortgage calculator is easy and simply requires a few steps and information, as follows:
Step 1: Enter The Interest Rate
Input the estimated interest rate that your lender is charging you. The rate will have a direct impact on the overall cost of your mortgage.
Step 2: Input The Amortization Period
Enter the total length of your mortgage — either in months or years. The longest amortization period is 30 years, for first-time buyers and those buying a newly-built home.
Step 3: Enter The Down Payment
Input the amount you plan to put toward the purchase upfront. Keep in mind that down payments of less than 20% require mortgage default insurance.
Step 4: Enter The Home Price
Input the purchase price of the property.
| What Does A Mortgage Calculator Show You? A mortgage calculator will tell you the following: – Number of payments over your loan term – Estimated monthly payment amount – Total interest paid over the life of the loan – Total repayment amount, including both principal and interest – Detailed amortization schedule that breaks down how each payment is allocated between principal and interest |
Speak With A Mortgage Specialist
Mortgage Calculator Terms: Explained
The world of mortgages comes with all sorts of terms that you may not be familiar with. But before you apply, it’s important to understand these terms and how they impact your loan cost.
Down Payment
A down payment on a home is the upfront amount you pay toward the purchase price. The remainder of the purchase price is then covered by a mortgage.
The minimum down payment requirement in Canada is 5% of the home’s purchase price, though it can be higher depending on the actual cost:
| Home Price | Minimum Down Payment |
| Up to & including $500,000 | 5% |
| $500,000 – $1.5 million | -5% of the first $500,000 -10% for amount exceeding $500,000 |
| $1.5 million+ | 20% |
Learn more: Your Guide To Mortgage Down Payments In Canada
| Note: Borrowers who put down less than 20% will be required to pay mortgage default insurance. Also referred to as CMHC insurance, this type of policy is paid for by the borrower but is designed to protect the lender in case the borrower ever defaults. The insurance provider involved will calculate the premium based on a percentage of the loan amount. This percentage is based on the LTV ratio of the mortgage, and the premium is either paid up front in one lump sum or rolled into the mortgage. Learn more: Mortgage Default Insurance (CMHC Insurance) |
Mortgage Interest Rate
The interest rate you’re charged usually comes down to two things: the prime rate/bond market, and your level of risk as perceived by the lender.
Your Risk Level
Your lender will assess your risk level before they even agree to loan you funds to buy a home. If you’re approved, your risk level will play a key role in the interest rate you’re offered. If you’re low-risk, your rate will likely be lower. But your rate will be higher if you’re considered higher risk.
So, how does your lender determine what risk level you’re at? There are a couple of things:
- Your credit score: Your payment history and financial background play a role in your credit score. A higher score paints the picture of a responsible borrower who is diligent with their money, while a lower score says the opposite. The higher your score is, the lower your interest rate will likely be, and vice versa.
- Loan-to-value ratio (LTV): Your LTV is a measure of the loan amount relative to the value of the home you plan to buy. A lower LTV will give you more equity in the home and would make you a lower risk for the lender, thereby helping to lower the interest rate you’re offered.
Mortgage Term Vs. Amortization Period
It’s common for homebuyers to confuse the mortgage ‘term’ and ‘amortization’. But in fact, they’re completely different.
Term
The mortgage term is the amount of time that you are committed to your current mortgage contract with your lender, including the interest rate and other conditions. Typical mortgage term lengths are usually five years, though they can be shorter or longer depending on the deal you strike with your lender when you first take out your mortgage.
Once the mortgage term expires, you can:
- Renew your mortgage, either with your current lender or a new one
- Refinance your mortgage
- Pay off your entire loan amount in full
Amortization Period
The mortgage amortization period is the entire length of time that you have to pay off your mortgage amount in full. In Canada, the maximum amortization period allowed is 25 years (or 30 years for uninsured or first-time buyers and/or those buying a new build)
Note: An uninsured mortgage simply means that at least a 20% down payment was put forth, allowing the borrower to avoid having to pay mortgage default insurance.
That said, there are also shorter amortization periods given, such as 15 or 20 years. There are pros and cons to both short and long amortizations:
| Pros | Cons | |
| Short Amortization Periods | – Significant interest savings over the life of the loan – Mortgage-free sooner | – Bigger mortgage payments |
| Long Amortization Periods | – Lower mortgage payments – Easier to budget for | – More interest paid over the life of the loan – Takes longer to pay off |
Learn more: Mortgage Term vs. Mortgage Amortization
Why Use a Mortgage Calculator?
There are several reasons why a mortgage calculator can be useful before applying for a mortgage:
- Estimate Your Monthly Payments: Understanding your monthly mortgage payments can help you determine how much you can afford, giving you a realistic view of your monthly obligations.
- Compare Different Loan Options: By evaluating various interest rates, loan terms, and down payment amounts, you can find the most affordable mortgage. Even a small difference in interest, for instance, can save you thousands over time.
- See How Your Payment Is Split: An amortization breakdown shows how much of each payment goes toward the loan principal versus interest. Early on, most of your payment goes to interest. Then as time goes on, more goes to principal.
- Budget More Accurately: Knowing your exact monthly costs lets you plan for other expenses, like utilities and maintenance.
- Plan For Long-Term Financial Impact: Your mortgage affects your financial future, so choosing the right mortgage structure can ensure that it aligns with your long-term goals.
How To Determine Mortgage Affordability
To determine how much you can afford, you’ll need to factor in several components, including the following:
- Annual household income (before taxes): Your income plays a direct role in your ability to afford a mortgage.
- Down payment amount: A larger down payment will reduce the loan amount and mortgage payments, and may also help you secure a lower rate and even avoid mortgage default insurance.
- Mortgage interest rate: This is the cost of borrowing. Even a fraction of a point can mean the difference between thousands of dollars over the life of the mortgage.
- Current monthly expenses: Your existing debt will impact how much income you have available to cover mortgage payments.
- Your Debt Service Ratio: To qualify for a mortgage, your housing costs should not exceed 39% of your gross income (GDS), and your total monthly debt payments should stay below 44% (TDS).
Learn more: Mortgage Affordability
Other Costs Of Homeownership To Consider
Besides your mortgage payments, there are several other costs you’ll need to cover as a homeowner that you should budget for before applying for a mortgage:
- Closing Costs: Once the deal closes, you’ll need to pay closing costs, which cover legal fees, inspections, land transfer taxes, and other expenses. These costs range from 1.5% to 4% of the home’s price.
- Property Taxes: You’ll need to pay property taxes each year, which varies by location and assessed home value.
- Home Insurance: Protect your home and belongings with a home insurance policy, which is typically required by lenders.
- Utilities: Electricity, water, gas, and internet can add hundreds of dollars to your monthly costs, especially in larger homes.
- Maintenance & Repairs: You’ll inevitably need to repair something in your home, and regular maintenance is needed for general upkeep. Experts recommend budgeting 1% to 3% of your home’s value each year for maintenance.
- Condo Fees: If you live in a condo complex, you’ll need to add condo fees to your list of regular expenses.
FAQs
Why is using a mortgage calculator important?
Can a mortgage calculator show total interest paid over time?
Do I need to know my credit score to use a mortgage calculator?
Is a mortgage calculator useful for refinancing decisions?
How accurate are mortgage calculators?
Note: Loans Canada does not arrange, underwrite or broker mortgages. We are a simple referral service.
Glossary
| TERM | DEFINITION |
|---|---|
| Add-Ons | Any features or services that are applied on top of the base price of a car are considered add-ons. These can include things such as tinted windows, heated seats, leather seats, alarms, and wheel locks, to name a few. |
| Base Price | The base price of a car is the cost of the vehicle without any upgrades or added features that can be added after the car is ordered from a dealership. Only standard equipment and the manufacturer’s warranty are included in the base price, but any other fees will be added afterward. |
| Certified Pre-Owned (CPO) | CPO cars refer to used cars that have been certified, either by the dealership selling the car or the manufacturer of the vehicle. This gives consumers confidence knowing they are buying a used vehicle that is in good condition. When a used car is obtained by a dealership, it is inspected by a certified mechanic. The car is then repaired if it meets the required standards and is then ready to be sold as a CPO vehicle. |
| Clear Title | A clear title means that the owner of the car has a free and clear title and no longer carries a balance owing on a car loan. There are no liens of the title or levies from creditors. |
| Dealership | Auto dealerships are businesses that are authorized to sell new or used automobiles to consumers and serve as a direct dealer for automakers |
| Dealership Financing | Consumers can obtain dealer financing to help fund the purchase of a vehicle. A contract is signed with a dealership that requires a consumer to pay for a specific amount plus interest and funding fees over a certain period of time. Dealers will send the details of the consumer’s financials to various lenders to find one that will approve the loan. |
| Depreciation | Depreciation refers to the decline in the value of a vehicle. Immediately after purchase, a vehicle will become less valuable as soon as it is used. Put another way, depreciation is the rate at which an automobile loses its value over time |
| TERM | DEFINITION |
|---|---|
| Extended Warranty | Vehicles come with a manufacturer’s warranty when purchased, but buyers can choose to purchase an extended warranty. This serves as a form of insurance policy on the vehicle to cover the cost of potential repairs in the future. An extended warranty is usually good for a certain period of time and/or mileage. |
| TERM | DEFINITION |
|---|---|
| Lease | A contract that allows an individual the right to use or occupy a property for a specified period of time in exchange for a monthly payment. Leases are common for a property like apartments and vehicles. The individual on the lease does not own the asset at the end of the lease’s term, it is strictly for rental purposes. |
| TERM | DEFINITION |
|---|---|
| MSRP (Manufacturer’s Suggested Retail Price) | Car manufacturers will offer recommendations on how much a car should be priced at the retail level, known as the manufacturer’s suggested retail price, or MSRP. The purpose of the MSRP is to standardize pricing in the automobile industry so that there is not a lot of fluctuation in price from one dealership to another. |
| TERM | DEFINITION |
|---|---|
| Title Loan | A title loan uses the vehicle title as a form of collateral to secure a loan. Borrowers must own their vehicles free and clear and no longer owe any amount on a car loan. A lender will place a lien on the car title in exchange for funds. If the borrower defaults on the loan, the lender can take possession of the vehicle and sell it to cover any losses. |
| Trade-in Allowance | A trade-in allowance is the amount that a car dealer will reduce the cost of a new car purchase by after the consumer’s old vehicle has been traded in. It is somewhat like being given credit from the sale of an existing vehicle that is then applied to the purchase of a new vehicle. |
| Trade-in Value | A trade-in value is the amount that dealerships offer consumers for their vehicle and is typically applied toward the purchase price of another vehicle. Dealerships will assess the value of the vehicle and will base the amount that can be applied to a new car purchase. The consumer will then trade in the old vehicle and the assessed value amount will be deducted from the price of another vehicle. Trade-in value is often different than what the vehicle may be worth when sold in the open market. |
| TERM | DEFINITION |
|---|---|
| Vehicle Identification Number (VIN) | Every vehicle will have its own unique vehicle identification number, which is used to identify a specific vehicle. No two vehicles will have the same VIN, making them easily identifiable with this unique 17-character code. |