I've notice as I search the internet that it can be difficult to find an online mortgage payment calculator that uses the proper calculations for Canadians. Our mortgage payments are calculated differently than in the US.
The interest rate that lenders can charge is legislated by the federal government to be compounded semi-annually not in advance. The mortgage payments in Canada are calculated based on a semi-annual compounding period. In other countries, mortgages are compounded monthly, which slightly increases the cost of borrowing.
I created this calculator for Canadians. Please let me know how it works for you and if there are modifications you would like to see.
Mortgage Payment Calculator
How to interpret the results of this Canadian Mortgage Payment Calculator
Make sure that you fill in every section. If you forget to complete one of the sections, you may not get the correct result.
This calculation provides results based on the purchase price of a home. You provide the following input:
- Purchase Price
- Percentage Down Payment (minimum down payment in Canada is 5%)
- Mortgage Term, most clients choose a 5 year term.
- Amortization, the time it takes to pay off your home. Most clients choose 25 years to start with.
- Choose an interest rate. We don't provide current rates here (they change too much!) Connect with us through messenger and I can let you know what current rates are, otherwise guess for now!
- We also ask for the estimated annual property taxes and amount of the monthly condo fees. These are required to calculate the estimated income required to qualify for this purchase price.
The results will provide you a summary of how the mortgage is calculated, the mortgage payments and the approximate income required to qualify for this purchase price.
Here is a summary of the results:
- Purchase Price, you entered this earlier
- The down payment you chose, this is the dollar amount based on the percentage you choose
- the amount remaining, that is, the purchase price minus the down payment
- If you have less than 20% down payment, then the mortgage requires default insurance. We calculate that for you based on current premiums.
- The total mortgage amount rounds up these numbers
- The monthly mortgage payment is then provided. This is the principle and interest payment based on the interest rate you chose along with the total mortgage amount.
- There is a summary of the monthly property tax payment and the condo fees that you had input earlier
- Based on the mortgage payment, property taxes and condo fees, we provide you with an estimate of the income required to qualify for this purchase price. Note, there are assumptions that you have little debt. If you have other monthly obligations, you may need to earn more to qualify for this purchase price amount
- Finally, we calculate the balance of the mortgage that would remain at the end of the term, assuming you kept the payments the same for the whole term.
When I meet with clients, I use these exact calculations for every client discussion. It's really important that you know how much your payments will be so that you can budget for your new home purchase appropriately.
I also like to look at the balance of your mortgage at the end of the term. This way you can get a good idea of how much equity that you are building in your home as you make the payments.
How is the qualifying income calculated with this mortgage payment calculator?
In Canada, mortgage qualification is legislated by an agency of the government called OSFI. The Office of the Superintendent of Financial Institutions. For mortgages with less than 20% down, there is a qualifying interest rate that is used called the benchmark.
All lenders must use the benchmark to determine the income required to qualify for a mortgage. In these calculations, the benchmark is used to calculate the estimated qualifying income required.
If you chose a down payment of 20% or more, the qualifying rate could actually be higher than the benchmark that I used. For 20% or more, I have simply used the benchmark rate for the purposes of this calculator.
It's important to note that if you purchase with 20% down or more, you have an option to increase the amortization from 25 to 30 years. This will make the payment lower for the same mortgage amount, or will reduce the income required to qualify for the same amount.
It's also important to note here that the qualifying income calculation assumes that you have little debt. That is, your monthly debt payments don't exceed 5% of your gross monthly income. If your debt payments do exceed 5% of your gross income, then you will qualify for a lower mortgage amount.
Does it matter if I'm a First Time Home Buyer?
This calculator will work whether you are a first time home buyer or next time or 10th time home buyer. All purchasers are allowed to purchase a home in Canada with as little as 5% down. The high ratio insurance calculation only depends on the amount of down payment that you provide. The high ratio insurance calculation does not change if you are a first time home buyer.
If you are a first time home buyer, there are a few programs that you would be eligible for. You can utilize your RSP's toward your home purchase. There is also a first time home buyer incentive that provides a 5% or 10% equity injection by the government through CMHC. There is also a home buyers grant that you could receive.
You can read about how the home buyer incentive works on an article that I wrote on this website. There is also a calculator on that page that will help you to figure out how much incentive you could be eligible for. Click here to read that article about the Home Buyer Incentive Program.
This calculator was created because I use it so much for clients and I've seen so much benefit from calculating these numbers for clients.
With this calculator, you can get a much better idea about what it will cost to purchase a home that you might have your eye on. You and also see if your income is close to what is require to qualify. You don't want to be searching for homes that are too far out of your price range.
If you have questions or want to see how much you actually qualify for, use the calculator, fill in your name and contact details. We will connect with your right away.
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