When looking for a mortgage loan, it is important to understand the cost and what is included within that price range.
Gone are the days when calculating mortgage costs and payments used to be complicated.
You can now use a mortgage calculator to take the guesswork out.
By doing so, you will determine the best mortgage loan that suits your situation.
Here I provide everything you need to know about mortgage payment calculators in Canada.
At the end of this post, you should know how to use this type of calculator for your mortgage loan.
Before then, let’s understand some basic concepts.
What is a Mortgage?
A mortgage simply refers to a kind of loan used to buy a house. Also known as a mortgage loan, you can use it to buy a house without having the money in full.
Most Canadian homeowners were able to buy their homes through a mortgage.
So, if you can’t afford to pay for a property outright, you’ll need a mortgage.
However, there are several instances where having a mortgage on your house makes sense even if you have complete funds to pay.
For example, if you want to invest and acquire a house, a mortgage could be ideal.
Some of the requirements for getting mortgage approval include having a steady income stream, decent credit score and history.
However, taking a mortgage loan is one thing and paying it off is another. If you’re not careful, a mortgage could be the cause of your financial downfall.
Consequently, before and after getting a mortgage loan, you need to understand the tricks of mortgage payment.
What is a Mortgage Payment?
This simply refers to the monthly payment you make toward clearing your mortgage loan.
It’s important to know that your mortgage loan consists of two major things: principal and interest.
The principal refers to the total amount you borrowed. On the other hand, interest refers to the amount your lender charges you for the mortgage loan.
So when you make your monthly mortgage payment, part of it is allocated to your principal and the other part to your mortgage interest.
Notably, different mortgage loans have different interests.
Thus, you need a special calculator to know exactly how much a mortgage loan will cost you.
What is a Mortgage Calculator?
This is a special calculator that helps you determine your mortgage loan and monthly mortgage payment.
With this type of calculator, you can also determine your monthly payment schedule and negotiation options.
Furthermore, this calculator takes the guesswork out of your search for the perfect mortgage loan.
Depending on your needs, you may need one calculator for the mortgage to the other in the mortgage process.
So understanding the different types of calculators for mortgages is key to making a cost-effective decision.
What are the Types of Mortgage Calculators?
There are different types of calculators for mortgages. However, for this post, we shall focus on the major ones below:
1. Mortgage Affordability Calculator
This type of calculator helps you find a mortgage that is perfect for your needs and budget.
With this calculator, you can assess your family income and expenses, helping you find the perfect mortgage.
This calculator is ideal for use before applying for a mortgage loan.
2. Mortgage Payment Calculator
This type of calculator helps you determine your monthly mortgage payment based on your down payment, mortgage term and interest.
With a mortgage payment calculator, you can also determine the proper payment schedule to save you costs.
You can use a mortgage payment calculator before and even after your mortgage loan approval.
3. Mortgage Prepayment Charge Calculator
A mortgage prepayment charge calculator helps you determine ways to renegotiate your high mortgage rates for lower rates.
With this calculator, you will know what it takes to pay off your mortgage loan ahead of time and the applicable interest charges.
Some lenders have mortgage prepayment charges. So you need to check your mortgage agreement to know what it costs to make a mortgage prepayment.
This calculator is ideal when you get extra income while having a mortgage loan. You can also use it when looking for lower interest rates.
How Does a Mortgage Payment Calculator Work?
As mentioned earlier, each type of calculator for mortgages works differently.
However, a mortgage payment calculator works in a simple way. All you need is to provide it with some basic information, and you have your result in seconds.
Here’s the information a mortgage payment calculator requires to give you results:
- Total Mortgage Amount: This refers to the full price of the house you’re buying, excluding a down payment.
- Amortization Period: This refers to your mortgage loan’s total duration or term ranging from 5-25years or more.
- Mortgage Rate: This refers to your mortgage interest rate. It is determined by the type of mortgage rate you choose. That’s, whether flexible or variable rate.
- Payment Frequency: This refers to your mortgage loan payment schedule. It could be weekly, bi-weekly, monthly etc.
Once you provide the above information, the mortgage payment calculator will do its magic and give you an accurate estimate.
Why Use a Calculator for a Mortgage?
There are many benefits of using a calculator for a mortgage. But here are the major ones:
1. Accurate Estimate
When you use a calculator for a mortgage, you will have an accurate estimate on the mortgage you need and how to pay for it.
Consequently, this calculator takes the guesswork out of your mortgage process and helps you focus on what matters.
2. Save Time
A calculator for a mortgage helps you determine your perfect mortgage loan, payment amount and schedule, helping you save time.
All you need is to provide the calculator with some basic information, and you will have an accurate estimate in seconds.
3. Compare Options
To make the best mortgage choice, you need to compare different options. A calculator for a mortgage helps you achieve that with ease.
This calculator helps you choose the perfect mortgage that suits your needs and budget, from mortgage term to the mortgage rate.
4. Save Cost
If you’re looking for a cost-effective way to acquire and pay off your mortgage, a calculator for a mortgage is all you need.
With this calculator, you can save thousands of dollars on mortgage interest rates.
Furthermore, you can rely on this type of calculator to choose a mortgage loan that suits your mortgage.
What are the Best Mortgage Payment Calculators in Canada?
When it comes to mortgage payment calculators in Canada, there are many options out there.
However, not all calculators for mortgages are the same. That’s why it is essential to use the best mortgage payment, calculators.
Based on my personal experience and what I have seen works for others, here are the best calculators for mortgage payment in Canada:
1. Rate Hub Mortgage Payment Calculator
Rate Hub is one of the leading FinTech companies in Canada.
With the Rate Hub calculator, you can determine your mortgage payment using your mortgage amount, amortization period, mortgage rate and payment schedule.
2. Canada Revenue Agency Mortgage Payment Calculator
Like Rate Hub calculator, CRA calculator also helps you determine your mortgage payment with ease.
Also, you can use this calculator to know when and how to make your mortgage payment cost-effectively.
3. CIBC Mortgage Payment Calculator
The CIBC calculator is also ideal for calculating your mortgage payment accurately. You can use it to know when you need to make a payment.
Furthermore, CIBC has a mortgage affordability calculator, mortgage selector, mortgage prepayment charge calculator and home equity calculator
4. WOWA Mortgage Payment Calculator
Whether you’re looking for a new mortgage or looking to renew/refinance, the WOWA calculator can help.
This calculator is available for all Canadian provinces, and you can use it to make the best mortgage payment decision.
5. RBC Mortgage Payment Calculator
Royal Bank of Canada provides one of the best mortgage payment calculators out there.
Like the above calculators, the RBC calculator works similarly by using your basic information to give you an accurate estimate of your mortgage payment.
Finally, you can’t make the wrong decision with any of the above mortgage payment calculators.
They all work the same way and provide accurate results.
But if you’re looking for other calculators for mortgages, consider the CIBC range of calculators.
3 Things to Consider for Your Mortgage Payment
If you’re in the process of applying for a mortgage loan, it is important to make the wisest decision.
That’s to say; there are things you need to consider before making a final decision.
When you make the wrong decision, you may not only lose your home, but you may endanger your financial security.
So consider the following factors before taking a mortgage loan:
1. How Much to Borrow
The total amount of your mortgage loan consists of the price of the house and mortgage insurance (if applicable).
Understand the implication of your budget. Is it something you can afford without sacrificing your current standard of living?
Thus, ensure that you can commit to paying the total mortgage amount and interest when due.
Don’t rush to it. Use a calculator for a mortgage to find a mortgage loan that suits your budget.
2. Location
Considering the location of your mortgage is also a wise decision before taking a mortgage loan.
Depending on the province or region where the house is located, the interest rate of the mortgage rate may be low or high.
So if the mortgage rate is low, the same will be your payment, but if it’s high, you will likely make high mortgage payments.
3. Type of Interest Rate
Choosing between fixed and variable mortgage interest rates could be critical to the success of your mortgage payment.
As the name implies, a fixed mortgage rate remains constant throughout your mortgage term.
On the other hand, a variable mortgage rate fluctuates as the prime mortgage rate fluctuates.
However, it is wise to seek the help of a financial advisor in choosing between a fixed mortgage rate and a variable rate.
A financial advisor is in the right position to tell you when to use a fixed rate or a variable rate since they are suitable for different periods.
5 Practical Tips on Lowering Your Mortgage Payment
It’s one thing to get a mortgage approval, and it’s another thing to remain consistent in payment.
Due to life surprises, you may not be consistent in meeting your required mortgage payment in the long run.
Also, you may want to cut costs by reducing your high mortgage payment amount.
So in addition to using the above calculators, here are five practical tips you can follow to lower your mortgage payment:
1. Make a Bigger Down Payment
To get mortgage approval, you generally have to make a minimum down payment.
How much down payment you make will determine your payment rate.
So it is wise to make a bigger down payment for a lower payment.
Also, your down payment may affect your mortgage period. For example, a below 20% down payment could lead to a 25years amortization period.
2. Consider Extra Means of Income
You can lower your mortgage payment by making a prepayment. This means paying your mortgage ahead of time.
One of the ways of funding prepayment is side hustles. When you have additional means of income, you can cut your amortization period.
There are many ways you can earn extra income from home or online to pay off your mortgage fast.
But remember, depending on your mortgage agreement, you may be charged for making a prepayment.
3. Know When to Extend the Amortization Period
Knowing when to extend the mortgage term will help you avoid penalties for late payment or default.
So what is the right time or extend your mortgage amortization period?
It all boils down to your current financial situation. If you’re finally down, it’s time to extend your mortgage amortization period.
Perhaps, you may need funds to invest. In such a situation, extending your amortization period could be necessary.
4. Consider a Lower Mortgage Rate
Whether you are having a fixed rate or variable rate mortgage, you may need to negotiate a lower mortgage rate at some point.
Engage a mortgage broker to help you negotiate a lower mortgage rate.
The lower the mortgage rate, the lower your mortgage payment.
It’s important to know when you need help, especially if you have a mortgage with high interest.
5. Avoid Debt
If you want to lower your mortgage payment, avoid taking debts and focus on paying off your mortgage.
Remember, a mortgage is also a loan. So when you take additional loans, it may be challenging to pay off your mortgage fast.
Whether secured or unsecured loans, avoid compounding your financial burden with debts.
However, if you’re already battling with too much debt, consider these steps to get out from them faster.
Executive Summary
In summary, a mortgage calculator is a great tool that helps you avoid errors before and after getting mortgage approval.
As mentioned earlier, this calculator helps you save time and cost in identifying the mortgage loan that suits your situation and budget.
Furthermore, a calculator for a mortgage is all you need to determine your perfect payment rate and schedule.
Hopefully, you can now take the next step of using the right calculator for your mortgage process.
FAQs
Is the Mortgage Calculator Free?
Yes, most mortgage calculators in Canada are free, including the ones listed above.
How is Mortgage Calculated in Canada?
A mortgage in Canada is calculated using the total mortgage amount, interest rate, amortization period and payment schedule.
Can You Negotiate Mortgage Rates in Canada?
Yes, you can negotiate lower mortgage rates in Canada using a mortgage broker. However, your success depends on your credit score and credit history.
Is it Better to Get a Mortgage from a Bank or Broker?
It depends on your credit score and source of income. A bank requires a steady stream of income and a decent credit score.
However, a broker may help you find a lender that can approve your mortgage if you have some issues.
Which Payment Schedule is Right for Me?
It depends on your cash flow. If you have enough cash flow, it’s better to choose a weekly or biweekly payment schedule to cut down your mortgage cost and amortization period.
But if you have limited cash flow, stick to a monthly payment schedule.
Have more questions? Let me know in the comment section.
