How to Calculate Your Mortgage Payments

Follow five straightforward steps to determine your monthly mortgage payment options.

A mortgage is a loan a homeowner borrows from a lender, such as their credit union, to buy a house. Usually, the homeowner makes monthly or bi-weekly payments to repay the loan, interest, and other costs (though other repayment options are available!).
In this post, we describe the factors you need to be aware of when paying for a mortgage, so you can then enter them into our free mortgage payment calculator to determine how much you’ll need to pay each month.

1. Determine your down payment and principal amount. 

A “down payment” is the amount you pay upfront toward your home, while the “mortgage principle” is the initial loan amount you will borrow to purchase a home after you make a down payment.

For example, if the house price is $350,000 and you are paying $50,000 upfront, your mortgage principle would be $300,000.

2. Calculate your monthly interest.

"Interest" is the fee you pay to borrow money. Your "interest rate" is the fee expressed in a percentage. While a variable rate can change dependent upon the economy, market conditions, and the decisions made by the Bank of Canada, a fixed rate remains the same throughout the term. The amount of interest you actually pay (in dollars and cents) reduces after each payment because it is based on the amount you owe.

The interest rate your credit union can offer you depends on the current rate offering and the type of mortgage. It's best to discuss with your lender what your options are.

3. Decide on your number of payments.

Fixed-rate mortgages are usually paid over a span of 15-30 years. This is called the “amortization period”.

Most mortgages are split up into terms. Terms generally have a fixed rate and range from 1-5 years in length. Once your term is complete you can renew your mortgage with a different rate and payment plan based on what the current rates are.

To get the number of payments you're expected to make, multiply the number of years by the payment frequency (e.g. 12 for monthly payments or 26 for bi-weekly).

Our mortgage calculator below will allow you to select different term lengths and will do the math for you to calculate the total number of payments.

4. Consider insurance, property tax, and other costs.

You should always consider additional homeownership costs. Although these aren't included in your mortgage payments, they affect your expenses and will have an impact on the price range of the home you wish to purchase.

If you put down less than 20% of the purchase price in your down payment, you will need to purchase mortgage insurance from a provider such as Canada Mortgage and Housing Corporation or Sagen. These premiums can be added to your mortgage principal amount and will increase your payments.

Another cost is property tax. This will depend on local tax rates and the value of the home. You can typically find property tax rates on the government website.

Every homeowner with a mortgage will be required to purchase house insurance to protect themselves and the lender in the event that there is unexpected damage (or worse) to the house — another cost to be considered.

Lastly, there can be other expenses associated with owning a home such as heating, condo fees, other utilities, maintenance/repairs, etc. If you are looking at doing some renovations shortly after your home purchase you may want to budget for this as well. Some renovations costs can be built into your mortgage and are best discussed with your lender when you apply.

Talk with your lender about these costs and how they might affect your payments or price range.

5. Calculate your monthly payments.

Now that you have a better idea of your principal borrowing amount, payment periods, and other costs, you can enter different options into our free mortgage payment calculator to find out how much your payments would be.

Please note that this calculator is designed for illustrative purposes only.

What is your next step?

It may be difficult to figure out on your own exactly how much you may need to purchase a home and what the best payment plan is for your financial situation and lifestyle. 

This is why working with one of Access Credit Union’s mortgage and lending specialists is helpful no matter what stage you are at in your planning.

The quickest way to start getting advice to mortgage your dream home is to get pre-approved using our online form.

Are you ready to feel at home with Access?

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