: Estimate total mortgage payment
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|Estimate total mortgage payment|
|Estimate total mortgage payment|
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|Estimate total mortgage payment|
|Estimate total mortgage payment|
Mortgage calculators are automated tools that enable users to determine the financial implications of changes in one or more variables in a mortgage financing arrangement. Mortgage calculators are used by consumers to determine monthly repayments, and by mortgage providers to determine the financial suitability of a home loan applicant. Mortgage calculators are frequently on for-profit websites, though the Consumer Financial Protection Bureau has launched its own public mortgage calculator.: 1267, 1281–83
The major variables in a mortgage calculation include loan principal, balance, periodic compound interest rate, number of payments per year, total number of payments and the regular payment amount. More complex calculators can take into account other costs associated with a mortgage, such as local and state taxes, and insurance.
Mortgage calculation capabilities can be found on financial handheld calculators such as the HP-12C or Texas InstrumentsTI BA II Plus. There are also multiple free online free mortgage calculators, and software programs offering financial and mortgage calculations.
When purchasing a new home, most buyers choose to finance a portion of the purchase price via the use of a mortgage. Prior to the wide availability of mortgage calculators, those wishing to understand the financial implications of changes to the five main variables in a mortgage transaction were forced to use compound interest rate tables. These tables generally required a working understanding of compound interest mathematics for proper use. In contrast, mortgage calculators make answers to questions regarding the impact of changes in mortgage variables available to everyone.
Mortgage calculators can be used to answer such questions as:
If one borrows $250,000 at a 7% annual interest rate and pays the loan back over thirty years, with $3,000 annual property tax payment, $1,500 annual property insurance cost and 0.5% annual private mortgage insurance payment, what will the monthly payment be? The answer is $2,142.42.
A potential borrower can use an online mortgage calculator to see how much property he or she can afford. A lender will compare the person's total monthly income and total monthly debt load. A mortgage calculator can help to add up all income sources and compare this to all monthly debt payments. It can also factor in a potential mortgage payment and other associated housing costs (property taxes, homeownership dues, etc.). One can test different loan sizes and interest rates. Generally speaking, lenders do not like to see all of a borrower's debt payments (including property expenses) exceed around 40% of total monthly pretax income. Some mortgage lenders are known to allow as high as 55%.
See also: Compound interest § Monthly amortized loan or mortgage payments
The fixed monthly payment for a fixed rate mortgage is the amount paid by the borrower every month that ensures that the loan is paid off in full with interest at the end of its term. The monthly payment formula is based on the annuity formula. The monthly payment c depends upon:
In the standardized calculations used in the United States, c is given by the formula:
For example, for a home loan of $200,000 with a fixed yearly interest rate of 6.5% for 30 years, the principal is , the monthly interest rate is , the number of monthly payments is , the fixed monthly payment equals $1,264.14. This formula is provided using the financial function in a spreadsheet such as Excel. In the example, the monthly payment is obtained by entering either of these formulas:
The following derivation of this formula illustrates how fixed-rate mortgage loans work. The amount owed on the loan at the end of every month equals the amount owed from the previous month, plus the interest on this amount, minus the fixed amount paid every month. This fact results in the debt schedule:
The polynomial appearing before the fixed monthly payment c (with ) is a geometric series, which has a simple closed-form expression obtained from observing that because all but the first and last terms in this difference cancel each other out. Therefore, solving for yields the much simpler closed-form expression
Applying this formula to the amount owed at the end of the Nth month gives (using to succinctly denote the function value at argument value ):
The amount of the monthly payment at the end of month N that is applied to principal paydown equals the amount c of payment minus the amount of interest currently paid on the pre-existing unpaid principal. The latter amount, the interest component of the current payment, is the interest rate r times the amount unpaid at the end of month N–1. Since in the early years of the mortgage the unpaid principal is still large, so are the interest payments on it; so the portion of the monthly payment going toward paying down the principal is very small and equity in the property accumulates very slowly (in the absence of changes in the market value of the property). But in the later years of the mortgage, when the principal has already been substantially paid down and not much monthly interest needs to be paid, most of the monthly payment goes toward repayment of the principal, and the remaining principal declines rapidly.
The borrower's equity in the property equals the current market value of the property minus the amount owed according to the above formula.
With a fixed rate mortgage, the borrower agrees to pay off the loan completely at the end of the loan's term, so the amount owed at month N must be zero. For this to happen, the monthly payment c can be obtained from the previous equation to obtain:
which is the formula originally provided. This derivation illustrates three key components of fixed-rate loans: (1) the fixed monthly payment depends upon the amount borrowed, the interest rate, and the length of time over which the loan is repaid; (2) the amount owed every month equals the amount owed from the previous month plus interest on that amount, minus the fixed monthly payment; (3) the fixed monthly payment is chosen so that the loan is paid off in full with interest at the end of its term and no more money is owed.
While adjustable-rate mortgages have been around for decades, from 2002 through 2005 adjustable-rate mortgages became more complicated as did the calculations involved. Lending became much more creative which complicated the calculations. Subprime lending and creative loans such as the “pick a payment”, “pay option”, and “hybrid” loans brought on a new era of mortgage calculations. The more creative adjustable mortgages meant some changes in the calculations to specifically handle these complicated loans. To calculate the annual percentage rates (APR) many more variables needed to be added, including: the starting interest rate; the length of time at that rate; the recast; the payment change; the index; the margins; the periodic interest change cap; the payment cap; lifetime cap; the negative amortization cap; and others. Many lenders created their own software programs, and World Savings even had contracted special calculators to be made by Calculated Industries specifically for their “pick a payment” program. However, by the late 2000s the Great Recession brought an end to many of the creative “pick-a-payment” type of loans which left many borrowers with higher loan balances over time, and owing more than their houses were worth. This also helped reduce the more complicated calculations that went along with these mortgages.
The total amount of interest that will be paid over the lifetime of the loan is the difference of the total payment amount () and the loan principal ():
where is the fixed monthly payment, is the number of payments that will be made, and is the initial principal balance on the loan.
The cumulative interest paid at the end of any period N can be calculated by:
In the United Kingdom, the FCA - Financial Conduct Authority (formerly the FSA - Financial Services Authority) regulates loans secured on residential property. It does not prescribe any specific calculation method. However, it does prescribe that, for comparative purposes, lenders must display an Annual Percentage Rate as prominently as they display other rates.
In Spain, the regulatory authority (Banco de España) has issued and enforced some good practices, such as clearly advertising the Annual Percentage Rate and stating how and when payments change in variable rate mortgages.
Your mortgage’s payment frequency is how often you will make mortgage payments.
Your mortgage payment frequency can be:
There are also accelerated payment frequency options:
There are 26 bi-weekly payments in a year. This is because there are 52 weeks in a year. Since a payment is made every two weeks, 52 weeks divided by 2 means that there will be 26 bi-weekly mortgage payments in a year.
= 26 bi-weekly payments in a year
Another way to look at this is to see how often a bi-weekly payment is made. Bi-weekly payments are made every 14 days. Since there are 365 days in a year, 365 days divided by a payment made every 14 days would give us 26 bi-weekly payments every year.
= 26 bi-weekly payments in a year
|Payment Frequency||Payments Per Year||Equivalent to Monthly Payments per Year|
|Monthly||12||12 Monthly Payments|
|Semi-Monthly||24||12 Monthly Payments|
|Bi-Weekly||26||12 Monthly Payments|
|Accelerated Bi-Weekly||26||13 Monthly Payments|
|Weekly||52||12 Monthly Payments|
|Accelerated Weekly||52||13 Monthly Payments|
Semi-monthly mortgage payments are not the same as bi-weekly mortgage payments.
With a semi-monthly mortgage payment, your mortgage payment will be made two times per month. For example, you might make a payment on the 1st of the month, and another payment on the 15th of the month.
Semi-monthly mortgage payments split every month into two. This makes two payments every month. With 12 months in a year, you'll be making 24 semi-monthly mortgage payments every year. You’ll simply divide a regular monthly mortgage payment into two.
Bi-weekly payments do not split months into two. Instead, bi-weekly mortgage payments are made every two weeks, which is considered to be every 14 days. While two bi-weekly payments will be made for 28 days, a month has either 30 days or 31 days, except for February. Over a year, this means that you’ll be making 26 bi-weekly mortgage payments, to account for there being 52 weeks in a year.
Bi-weekly mortgage payments have two extra payments every year, equivalent to one month of mortgage payments, over the amount of payments for a monthly or semi-monthly mortgage payment.
Accelerated bi-weekly and accelerated weekly mortgage payments also gives you the equivalent of an extra monthly mortgage payment every year, but it’s different from non-accelerated bi-weekly and weekly payments in that the mortgage payment amount is not reduced.
Non-accelerated bi-weekly and weekly mortgage payments are based on what a monthly mortgage payment would have been. For non-accelerated bi-weekly, you would calculate the payment by taking the monthly mortgage payment, multiplying it by 12 to get the amount to be paid every year, and then simply dividing it by 26 bi-weekly payments. You’ll still be paying the same total amount every year as you would with a monthly mortgage payment. You’ll simply be paying it over two extra payments, which means each non-accelerated bi-weekly payment is smaller.
The same thing happens with non-accelerated weekly mortgage payments. To calculate it, you'll also multiply the monthly mortgage payment by 12 to get the amount that you'll need to pay per year, and then divide it by 52 weeks. A weekly payment is made every 7 days, and it being non-accelerated means that you will still be paying the equivalent amount of a monthly mortgage payment, just over smaller individual payments.
Accelerated mortgage payments are the payment frequency options that will allow you to pay off your mortgage faster and save you potentially thousands in mortgage interest costs.
With accelerated bi-weekly payments, you'll still make a payment every 14 days (two weeks), which adds up to 26 bi-weekly payments in a year. The part that makes it accelerated is that instead of calculating how much an equivalent monthly mortgage payment would add up to in a year, and then simply dividing it by 26 bi-weekly payments, accelerated bi-weekly payments does the opposite.
To find your accelerated bi-weekly payment amount, you'll divide the monthly mortgage payment by two. Note that there are 12 monthly payments in a year, but bi-weekly payments are equivalent to 13 monthly payments. By not adjusting for the extra monthly payment by taking the total annual amount of a monthly payment frequency, an accelerated bi-weekly frequency gives you an extra monthly payment every year. This pays off your mortgage faster, and shortens your amortization period.
The same calculation is used for accelerated weekly payments. To find your accelerated weekly payment amount, you'll divide a monthly mortgage payment by four.
There isn't a large difference between paying your mortgage weekly or monthly, if we're looking at non-accelerated weekly payments. That's because the total amount paid per year is the exact same for both payment frequencies. You'll just pay a smaller amount with a weekly payment, but you'll be making more frequent payments. The real difference is when you choose accelerated weekly payments. Accelerated payments can shave years off of your amortization, and can save you thousands of dollars.
While it will depend on your specific situation, here are some general guidelines:
Let's compare mortgage payment frequencies by looking at a $500,000 mortgage in Ontario with a 25-year amortization, and assume that it has a fixed mortgage rate of 1.5% for a 5-year term.
The monthly mortgage payment would be $2,000. Now, let’s see how much it would be with semi-monthly, bi-weekly, and weekly mortgage payments.
|Payment Frequency||Payment Formula||Number of Payments per Year||Mortgage Payment Amount||Total Mortgage Payments per Year|
Monthly, semi-monthly, bi-weekly, and weekly all add up to the same amount paid per year, at $24,000 per year. For accelerated payments, you’re paying an extra $2,000 per year, equivalent to an extra monthly mortgage payment. This extra mortgage payment will pay down your mortgage principal faster, meaning that you’ll be able to pay off your mortgage quicker.
This mortgage calculator allows you to choose between monthly and bi-weekly mortgage payments. Selecting between them lets you easily compare how it can affect your mortgage payment, and the amortization schedule below the Canada mortgage calculator will also reflect the payment frequency.
The down payment is the amount you will pay upfront to obtain a mortgage. Making a larger down payment will reduce the amount that you will need to borrow, which means that your mortgage payments will be smaller.
The down payment that you enter into the mortgage calculator will affect the beginning balance of your mortgage. If you choose a down payment that is less than 20%, then the mortgage payment calculator will include the cost of CMHC insurance premiums into your mortgage by adding it to your principal balance.
Your minimum down payment depends on the purchase price of your property.
If you’re self-employed or have poor credit, your lender may require a higher down payment.
Yes. If your down payment is below 20% of the purchase price,
For more information, see the section on CMHC insurance below.
A mortgage with a down payment below 20% is known as a high-ratio mortgage mortgage. The term ratio refers to the size of your mortgage loan amount as a percentage of your total purchase price. All high-ratio mortgages require the purchase of CMHC insurance, since they generally carry a higher risk of default.
Your mortgage’s amortization period is the length of time that it will take to pay off your mortgage. A shorter amortization period means that your mortgage will be paid off faster, but your mortgage payments will be larger. Having a longer amortization period means that your mortgage payments will be smaller, but you’ll be paying more in interest.
In the mortgage calculator above, you can enter any amortization period ranging from 1 year to as long as 30 years. Some mortgages in Canada, such as commercial mortgages, allow an amortization of up to 40 years.
Here are some general guidelines for choosing an amortization period for your mortgage:
The term of your mortgage is the length of time that your mortgage contract is valid for. Your mortgage contract includes your mortgage interest rate for the term. At the end of your mortgage term, your mortgage expires. You will need to renew your mortgage for another term or fully pay it off. Your mortgage interest rate will most likely change at renewal.
This mortgage calculator uses the most popular mortgage terms in Canada: the one-year, two-year, three-year, four-year, five-year, and seven-year mortgage terms.
The most common term length in Canada is 5 years, and it generally works well for most borrowers. Lenders will have many different options for term lengths for you to choose from, with mortgage rates varying based on the term length. Longer terms commonly have a higher mortgage rate, while shorter terms have lower mortgage rates.
You will need to either renew or refinance your mortgage at the end of each term, unless you are able to fully pay off your mortgage.
Your mortgage’s interest rate is shown as an annual rate, and it determines how much interest you will pay based on your mortgage’s principal balance.
You’re able to select between variable and fixed mortgage rates in the mortgage calculator above. Changing your mortgage rate type will change the mortgage terms available to you.
Your regular mortgage payments include both principal payments and interest payments. Having a higher interest rate will increase the amount of interest that you will pay on your mortgage. This increases your regular mortgage payments, and makes your mortgage more expensive by increasing its total cost. On the other hand, having a lower mortgage interest rate will reduce your cost of borrowing, which can save you thousands of dollars.
Variable interest rates change based on your lender’s prime rate, which is controlled by your lender. If your lender increases their prime rate, then your variable interest rate will increase.
Lender’s will usually only change prime rates to match movements in the Bank of Canada’s policy interest rate. If the lender’s funding cost increases, such as through the Bank of Canada increasing their policy rate, then the lender will in turn increase variable mortgage rates. Prime rates are generally similar or identical between different lenders, with all Canadian banks currently having a prime rate of 2.45% as of July 2021.
Your variable mortgage rate is priced at a discount or a premium to your lender’s prime rate.
A variable rate lets you benefit from decreases in market interest rates, but it will cost you more if interest rates rise. Fixed rates are a better option if interest rates will rise in the future, but it can lock you in at a higher rate if rates fall in the future.
Of course, it’s not possible to exactly predict future interest rates, but a 2001 study found that variable interest rates outperform fixed interest rates up to 90% of the time between 1950 and 2000. If you’re comfortable with taking on risk, a variable mortgage rate can result in a lower lifetime mortgage cost.
Many mortgage lenders offer flexible mortgage payment options, such as the ability to skip a payment or to defer your mortgage payments. Most of Canada’s major banks allow you to skip a mortgage payment, with the exception of CIBC and National Bank.
Generally, you won't be able to skip mortgage payments for mortgages that are insured. Having a CMHC-insured mortgage means that your amortization cannot go over 25 years. For insured mortgages, you'll need to have made a mortgage prepayment that would be equivalent to the amount that you want to skip for you to be able to skip a mortgage payment in the future.
Lenders also have conditions in order to be able to skip a mortgage payment. Your mortgage must not be in arrears, and your current mortgage balance must not be more than your original mortgage balance at the start of your term.
Skipping a mortgage payment doesn't mean that the lender is giving it to you for free. Skipping a payment just means that you'll be paying it back later. When you skip a mortgage payment, interest that would have been charged would be added to your mortgage balance instead of being paid off. This increases your mortgage balance, which means that you'll be paying interest on your added interest.
If you don’t repay the skipped mortgage amount plus accumulated interest, then you’ll be paying interest on the interest for the rest of your mortgage’s amortization. This could make skipping a mortgage payment a very costly option to take. Fortunately, many lenders allow you to repay your skipped payments without any prepayment penalties.
|RBC||Once Every 12 Months Or If Prepayments Were Made|
|TD||Once Every Calendar Year Or Up to Four Months if Prepayments Were Made|
|BMO||Up to Four Months Every Calendar Year|
|Scotiabank||If Prepayments Were Made|
RBC allows you to skip one month's worth of mortgage payments once every 12 months. If your mortgage payment frequency is not monthly, then they will need to be skipped consecutively. For example, if you have bi-weekly or semi-monthly payments, then you will be able to skip two consecutive mortgage payments every 12 months. For weekly payments, you'll be able to skip four consecutive weekly payments.
If you have made extra mortgage payments in the same term, you'll be able to skip an equivalent amount of mortgage payments. For example, if you've made two double-up payments, equivalent to two extra monthly payments, then you'll be able to skip two months' worth of mortgage payments.
TD lets you skip a monthly payment, or the equivalent of a monthly payment, once every calendar year. TD only allows you to skip a monthly payment four times throughout the life of your mortgage. For example, if your TD mortgage has an amortization period of 25 years, you won't be able to skip payments more than four times with TD over those 25 years.
TD lets you prepay in advance to skip more payments if needed. This "payment vacation" is allowed for up to four months at a time. For example, you've made four months worth of mortgage prepayments towards your TD mortgage. You'll now be able to skip four months of mortgage payments.
BMO lets you skip one months worth of mortgage payments every calendar year. BMO also has a Family Care Option that allows borrowers to skip four mortgage payments per calendar year to take care of your family, such as caring for a new baby or a sick family member.
Self-employed mortgage borrowers are not able to use BMO's Family Care Option. Borrowers that are receiving mortgage disability benefits from their mortgage insurance are also not able to skip mortgage payments.
Scotiabank’s Miss-a-Payment lets you skip mortgage payments if you have already prepaid an equivalent amount. This could be by making a lump-sum mortgage prepayment, by increasing your regular mortgage payments, or by matching a payment.
Prepaying your mortgage allows you to directly pay down your mortgage principal balance, allowing you to be mortgage-free sooner. Banks and mortgage lenders have limits on the amount of mortgage prepayments that you can pay per year for closed mortgages without being charged prepayment penalties. If you have an open mortgage, you won’t have any prepayment limit or charges.
|Lender||Annual Limit (% of original mortgage amount)|
|CIBC||10% for Fixed Mortgages 20% for Variable Mortgage|
Many mortgage lenders require you to pay property taxes through your lender in your regular mortgage payment, with your lender then paying your municipality. This is because failing to pay your property taxes can lead to your municipality placing a lien on your property, which will be placed in the front-of-the-line before your lender's claim on your home.
If you pay your property taxes through your lender, then your lender will estimate an amount that would need to be paid every month in order to cover the total amount of property taxes for the entire year. If the amount that the lender collected is not enough to cover the actual property tax due, then the lender will advance the due amounts to the municipality and charge you for the shortfall.
Your lender may charge you interest on the amount of any shortfall. The lender may pay you interest if you have overpaid and have a surplus. Property tax bills or property tax notices are required to be sent to your lender, as failing to send it may mean the collected property tax amounts are not accurate.
If your lender pays property tax on your behalf and adds the cost to your mortgage payments, then you will still receive a copy of your municipality's property tax bill, or a mortgage tax bill. Mortgage deferrals or using an option to skip a mortgage payment doesn’t mean that you get to skip your property tax payment or mortgage life insurance premiums too. You will still need to pay your property taxes and insurance premiums, as skipping a mortgage payment only skips the interest and principal payment.
Some lenders allow you to pay property taxes on your own. However, they have the right to ask you to provide evidence that you have paid your property tax.
If paying property taxes on your own, your municipality may have different property tax due dates. Property tax might be paid one a year, or in installments through a tax payment plan. Installments might be monthly or semi-annually.
Missing a mortgage payment, whether you forgot to make a payment, you had insufficient funds in your account, or for other reasons, is something that can happen. A mortgage payment is considered to be late if it's not paid on the date that it is due.
Missing a mortgage payment means that you need to catch-up by making a double payment the next month. Otherwise, you will be one month behind on your mortgage payments and have them all considered to be late.
Your lender will try to contact you if you miss a mortgage payment. They will let you know how your missed payment can be made, such as taking the payment before the next payment due date or doubling the payment at the next payment date.
Depending on your mortgage contract, you might be charged a late payment fee or a non-sufficient funds (NSF) fee.
As long as your mortgage payment hasn't been late for a long period of time, and you pay back the missed payment promptly, then your lender may not report it to the credit bureaus. Even so, missing your mortgage payment by one day is still enough to have it considered to be a late payment. If you miss multiple mortgage payments, your lender can report it, which will negatively affect your credit score and will stay on your credit report for up to six years.
While your mortgage lender might offer features such as being able to skip a mortgage payment or mortgage payment deferrals, you have to select to use this feature beforehand. You cannot simply miss a payment and choose to have a skip-a-payment feature applied retroactively.
These requests also take a few days to be processed. If it's within a few days of your payment date, then your current payment might be processed and only your next payment will be skipped. Lenders will also not allow you to use skip-a-payment options if your mortgage payments are in arrears.
A mortgage statement outlines important information about your mortgage. Mortgage statements are usually an annual statement, with it being sent out by mail between January and March rather than once every month. You may also choose to receive your mortgage statement online.
For example, TD only produces mortgage statements annually in January, while CIBC produces them between January and March. If you have an annual mortgage statement, it will usually be dated December 31. You may also request a mortgage statement to be sent.
Information on a mortgage statement are up to the end of your statement period and include:
Mortgage life insurance is an optional insurance policy that you can purchase from your mortgage lender that protects your mortgage balance. If you pass away, a death benefit will be paid to your mortgage lender to pay off some or all of the mortgage balance. If you get a critical illness, disability, or lose a job, you’ll receive a payout that helps cover some or all of your monthly mortgage payments. In all of these cases, your lender is the one that receives the insurance payouts.
With life insurance, you’re purchasing a policy with a beneficiary that you get to choose. You can also choose to purchase a policy with a certain payout benefit, rather than having it tied to the balance of your mortgage.
Mortgage life insurance premiums are based on the borrower’s age and the balance of their mortgage. Premiums are charged as a certain rate per $1,000 of mortgage balance. Mortgage life insurance in Canada is completely optional. A lender can’t force you to purchase mortgage life insurance, no matter your down payment. However, if you make a down payment less than 20%, your lender can require you to purchase mortgage default insurance.
Mortgage life insurance can be easier to obtain, but having a potential insurance benefit that gradually decreases as you make mortgage payments means that the benefit gets smaller while your insurance premiums stay the same.
Canada’s major banks all allow you to cancel your mortgage life insurance at any time, and to receive a refund if you cancel your plan within the first 30 days. This 30-day free look or 30-day review period is important as it lets you change your mind should you decide that mortgage life insurance isn't right for you.
To cancel, you can call your lender's insurance helpline, complete a form at a branch, or send a written request by mail.
Mortgages with a down payment of less than 20% are required to be insured due to the higher level of risk that they carry. This insurance protects the mortgage lender should you default on the mortgage. Mortgage default insurance does not protect you or help you cover mortgage payments.
The largest provider of mortgage loan insurance in Canada is the Canada Mortgage and Housing Corporation (CMHC), which is owned by the Government of Canada. Some mortgage lenders allow you to go through a private mortgage insurer instead, such as Canada Guaranty or Sagen.
Mortgage default insurance is required for mortgages with a down payment of less than 20% at a federally-regulated mortgage lender, such as at a bank. If you make a down payment that is 20% or larger, then you will not need to get an insured mortgage. Mortgage default insurance premiums are added as a one-time lump-sum onto your mortgage balance at closing, which means that you’ll be paying for it in your mortgage payments over the life of your mortgage.
Unregulated lenders, such as private mortgage lenders, may allow you to get an uninsured mortgage with a down payment that is less than 20%.
The CMHC has eligibility requirements that limit the type of mortgages that can be insured.
CMHC insurance will not cover homes with a cost of $1 million or more.
Mortgages with an amortization period greater than 25 years are also not eligible for CMHC insurance.
You can still get CMHC insurance for mortgages with a down payment larger than 20%.
CMHC insurance premiums are a percentage of your mortgage and are paid by your mortgage lender. Provincial sales tax is added to premiums for mortgages located in Ontario, Quebec, Manitoba. and Sadkatachewan.
Premiums start at 2.4% of the mortgage amount for down payments of 20% or less, going up to 4% for a down payment of 5%. While your mortgage lender will pay the insurance premium, they will usually pass this cost indirectly onto you. However, you may still save money after these premiums through lower mortgage rates that insured mortgages usually have.
To find out how much CMHC insurance would cost for your home, visit our CMHC insurance calculator.
|Down Payment||CMHC Insurance Premium|
|5% - 9.99%||4%|
|10% - 14.99%||3.1%|
|15% - 19.99%||2.8%|
|20% - 24.99%||2.4%|
|25% - 34.99%||1.7%|
|Greater than 35%||0.6%|
Benefits of CMHC Insurance CMHC insurance allows you to make a down payment as low as 5% of the value of the home for homes less than $500,000, or 5% on the first $500,000 and 10% on the remainder for homes over $500,000 and less than $1 million. Since the mortgage is insured, mortgage lenders will often offer lower mortgage rates for insured mortgages.
Whether you’re a Canadian snowbird looking to purchase a second home in Florida or you’re planning on moving to the United States, there are differences between Canadian and U.S. mortgages.
The biggest difference that Canadian borrowers will notice is the difference in mortgage terms. In the U.S., mortgage terms are usually for the entire life of the mortgage. Since U.S. mortgage terms are the same as the mortgage's amortization period, the interest rate will be set for the entire life of the mortgage and will not need to be renegotiated.
Mortgage terms in the U.S. are commonly 30 years, while Canadian amortization periods are usually 25 years. There are adjustable rate mortgages in the U.S. which act as a fixed rate for a certain number of years, and then become a variable rate for the remainder.
Cross-border U.S. mortgage applications take a much longer time to process compared to Canadian mortgages. That's because American mortgages require more documentation and verification.
For Canadians looking to get an American mortgage, you'll need to provide documents such as your Canadian tax returns, proof of Canadian citizenship or U.S. visa, Social Insurance Number or U.S. Social Security Number, proof of assets, and insurance documents.
You can use your Canadian assets and equity in your Canadian home, but they'll be converted to U.S. Dollars when being considered in your application.
U.S. mortgage applications take around 45 to 60 days, while Canadian mortgages take around 5 to 10 days to process.
Mortgage interest can be tax deductible in the U.S. but that's not the case in Canada. Canadian homeowners can still use a tax strategy to make their mortgage interest tax deductible in Canada by using the Smith Maneuver.
Monthly mortgage payments are the most popular option in the U.S., and many lenders do not allow other mortgage payment frequencies. For example, Citibank, US Bank, and TD Bank do not allow bi-weekly mortgage payments. Some lenders that allow biweekly payment plans may charge an additional fee.
Many U.S. mortgage lenders allow you to make additional monthly mortgage payments, but if you’re looking to fully pay off your mortgage, then early mortgage payoffs for U.S. mortgages may come with a mortgage prepayment penalty. However, prepayment penalties are illegal for FHA loans, VA loans, and USDA loans. For lenders that do charge a prepayment penalty, it’s usually only charged if you fully pay off the mortgage within a few years of signing the mortgage loan.
In the United States, mortgage prepayment penalties are only allowed for the first three years of a mortgage loan. The penalty also can't be more than 2% of the mortgage loan balance for the first two years, and the penalty can't be more than 1% in the third year.
There are six states that ban prepayment penalties for all mortgage loans:
Other states that ban prepayment penalties on certain mortgage loan types, such as those with a high interest rate, subprime, or have a certain balance, include:
If a borrower is delinquent on their mortgage loan, an U.S. mortgage lender can choose to file a notice of default, which starts the foreclosure process. This notice of default is sent after there are 90 days of missed payments, with foreclosure starting after 180 days.
Foreclosures and power of sales in the United States work similarly to those in Canada. Some states, such as California and Texas, use non-judicial power of sale, while other states, such as New York and Florida, use judicial foreclosures.
Looking at Canada, power of sale is commonly used in Ontario, while foreclosures are more common in British Columbia, Quebec, and Alberta.
U.S. law requires a mortgage loan to be 120 days past due before foreclosure can begin. In Canada, there is no such law that prevents a lender from starting the foreclosure process before a certain number of missed payments. For example, in Alberta, a foreclosure can start as soon as one missed mortgage payment. In Manitoba, foreclosure can start after one month of missed mortgage payments. Canadian foreclosures usually have a set number of months that the borrower can fully repay the due amount in order to prevent the forced sale of their home. This redemption period is usually six months.
The United States also has a federal foreclosure moratorium in 2021 that prevents foreclosures until July 31, 2021.
Power of sale can start earlier than foreclosures in the United States. In California, power of sale can start as soon as after 4 months of missed mortgage payments.
Before you take a mortgage, you need to know how different factors and components affect your loan. Besides, to be able to apply this calculator properly and to understand its computational background, it is crucial to get familiar with the following terms.
It is merely the amount you want to borrow from the bank. Its amount depends on two factors: the home value (the price of the property) and the down payment.
It is the amount of money you already have and able to use to pay for the property before you get the loan. Its level is an essential aspect when applying for a mortgage as it often represents the main obstacle to get the loan. The required minimum amount varies depending on the institution and the country's legislation. In the US, for example, the down payments range from 3,5% (FHA loans) to 20-25% of the purchase price. But that's not all. Since lower initial payment usually associates with higher risk to the lender, its sum also affects the interest rate. Thus, the more you pay from your savings, the lower the rate is. It is strongly connected to the LTV (loan-to-value) ratio, which indicates the ratio of the loan amount to the value of the property. So, if you see a 70% LTV offer, this means that you can borrow 70% of the purchase price while the minimum deposit is 30%.
It typically refers to the advertised annual rate of interest that is one of the most relevant factors you need to take into account when choosing a mortgage. It is worth to mention that the yearly interest rate is a nominal rate, that does not represent the real rate of interest. Therefore it is not always the best measure to express the true cost of your loan. The reason is that it doesn't incorporate additional factors that might alter the actual rate of interest charged on your mortgage. Such factors is, for example, the function of compounding and its frequency that indicates how often the interest is applied to the principal. If compounding occurs more often than yearly (as in the case of most loans), the actual interest amount in a year becomes higher. By incorporating the effect of compounding, the Annual Percentage Yield (APY), or with another term, the Effective Annual Rate (EAR) gives you a better guideline in this relation. Another useful indicator is the Annual Percentage Rate (APR), which takes into consideration the fees and other charges involved in the loan.
It is the interval in which you obliged to repay the borrowed money and fulfill the condition set out by the contract. Loan terms vary depending on the bank and mortgage type (fixed-rate mortgage have shorter terms than variable rate). Usually, one can take a loan for up to 20 or even 30 years, but some mortgages might last for 40 or 50 years. The loan term influences mortgage conditions. The longer the duration, the less you need to pay periodically, but eventually, you pay more since the bank charges interest for a more extended period. It is important to note that in some particular cases, you may pay off the principal amount faster. In this way, the amortization term, which is the actual length of time of mortgage payoff, will be shorter than the original term of the loan, and the paid interest became smaller.
It refers to the prevailing practice of how interest is handled during the loan term. More precisely, it is the compounding frequency - the regularity with which your lender applies the annual rate of interest to the principal's balance. The expression of compounding interest, however, is slightly misleading in this context. While in the case of a savings account, the base of compounding includes the interest beyond the principal, with amortization mortgages, the compounding effect comes solely from the varying principal payments. Since you are paying back the mortgage in equal parts, your installment includes a higher portion of interest at the beginning of the loan term. As you proceed with the loan repayment, the structure of your payments changes: in each period, the calculated interest gradually decreases, as you owe to the bank less money. In turn, this procedure allows for more of the principal to be repaid at each installment, leading to an accelerating drop in your remaining balance. You can easily observe this phenomenon on the graph of Annual Balances, as well as in the Amortization Table, which gives you a detailed picture of this matter.
When it comes to the schedule of your payments, you have multiple choices. It is worth to keep in mind that the higher payment frequency does not have a significant impact on your total interest and amortization term. For example, if your monthly payment is 200 dollars, but you decide to pay 100 dollars semi-monthly instead, the only gain comes from the compounding effect mentioned previously. The real difference appears, however, when the higher payment frequency matches with a higher than proportional installment. There are two types of repayment schedules that provide you such an option. The accelerated bi-weekly payments are exactly half of the monthly payment but collected every second week that means on each 14th day of the amortization term. Since a regular month has more than 28 days (except February, which is not in a leap year), you will have at least twice a year three payments in a month. Staying at the previous example, it means that you pay 100 dollars 26 times in a year, which equals an extra 200 dollars in a year. You may reach a similar result with an accelerated weekly schedule. In this case, your payment is the quarter of the monthly amount, but they are made precisely every seven days. In both cases, you pay a little more on a monthly bases, but the result is a faster repayment of the principal. Thus, after all, the amortization term shortens, and the lender can charge significantly less interest. For better insight, the below table summarizes the different payment scenarios with the resulting interest savings for a US mortgage of 100,000 dollars with a 5 percent interest rate and 20 years loan term.
|Payment Frequency||Periodic Payment||Annual Payment||Amortization Term||Interest Savings|
|Acc. Bi-Weekly||$329.98||$8,579||17 years 6 months||$8,349|
|Acc. Weekly||$164.99||$8,579||17 years 6 month||$8,464|
As we mentioned before, the most effective way to moderate the financial cost of your mortgage is to reduce the balance of the principal and so shorten the amortization term. There are two prominent ways to realize this: You may increase your regular installment (extra periodic payment), or you may pay a single amount at a specific date (lump sum prepayment). In both cases, the extra money directly affects your principal balance, that is, reducing the base for the interest calculation. You always need to keep in mind, however, that the bank may charge you an additional fee for compensating their lower interest revenue. Therefore, you should always consult with your lender in case of any advanced payment before the agreed due date.
This insurance aims to protect the lender in case a borrower defaults on a mortgage loan. Real estate mortgage companies in the US typically require to involve in such agreement when the down payment is less than 20 percent of the home value. It usually costs between 0.5% to 1% of the entire loan amount on annual bases. When the total equity (the financed part of your home) reaches 20 percent of the home value, the PMI might be canceled. The administrative procedure what the borrower needs to initiate, however, may take several months and require a formal appraisal of your home beforehand. To sum up, it is always better to enter into a mortgage contract with a larger down payment that reduces not only your interest charges but also eliminates PMI expenses.
In the US, its rate stands around 0% to 4% of the home value, depending on the location of your home. It covers expenses arising locally, for example, local education, local governments, and infrastructure. In some countries (like US) if you have a low down payment the lender will set up an escrow account to collect any additional expenses, which will be included in your installments.
It is a type of property insurance that covers losses and damages to the real estate and its accessories or other accidents in the home or on the property.
It is stand for homeowners association fee which is must be paid monthly by owners of certain types of residential properties, usually condominiums. The HOAs collect these fees to assist with maintaining and improving properties in the association.
You can add here all additional expenses that are not included explicitly in our calculator. For example, some banks will make you buy insurance against unemployment and other personal risks. It all depends on the bank's imagination. Besides, the lender may offer better terms in return for you buying additional products. (Credit cards, personal accounts, etc.) Usually, you will need to use them throughout the whole term of your loan.
Home Value: the appraised value of a home. This is used in part to determine if property mortgage insurance (PMI) is needed.
Loan Amount: the amount a borrower is borrowing against the home. If the loan amount is above 80% of the appraisal then PMI is required until the loan is paid off enough to where the Loan-to-value (LTV) is below 80%.
Interest Rate: this is the quoted APR a bank charges the borrower. In some cases a borrower may want to pay points to lower the effective interest rate. In general discount points are a better value if the borrower intends to live in the home for an extended period of time & they expect interest rates to rise. If the buyer believes interest rates will fall or plans on moving in a few years then points are a less compelling option. This calculator can help home buyers figure out if it makes sense to buy points to lower their rate of interest. For your convenience we also publish current local mortgage rates.
Loan Term: the number of years the loan is scheduled to be paid over. The 30-year fixed-rate loan is the most common term in the United States, but as the economy has went through more frequent booms & busts this century it can make sense to purchase a smaller home with a 15-year mortgage. If a home buyer opts for a 30-year loan, most of their early payments will go toward interest on the loan. Extra payments applied directly to the principal early in the loan term can save many years off the life of the loan.
Property Tax: this is the local rate home owners are charged to pay for various municipal expenses. Those who rent ultimately pay this expense as part of their rent as it is reflected in their rental price. One can't simply look at the old property tax payment on a home to determine what they will be on a forward basis, as the assessed value of the home & the effective rate may change over time. Real estate portals like Zillow, Trulia, Realtor.com, Redfin, Homes.com & Movoto list current & historical property tax payments on many properties. If property tax is 20 or below the calculator treats it as an annual assessment percentage based on the home's price. If property tax is set above 20 the calculator presumes the amount entered is the annual assessment amount.
PMI: Property mortgage insurance policies insure the lender gets paid if the borrower does not repay the loan. PMI is only required on conventional mortgages if they have a Loan-to-value (LTV) above 80%. Some home buyers take out a second mortgage to use as part of their downpayment on the first loan to help bypass PMI requirements. FHA & VA loans have different down payment & loan insurance requirements which are reflected in their monthly payments.
Homeowners insurance: most homeowner policies cover things like loss of use, personal property within the home, dwelling & structural damage & liability. Typically earthquakes & floods are excluded due to the geographic concentration of damage which would often bankrupt local insurance providers. Historically flood insurance has been heavily subsidized by the United States federal government, however in the recent home price recovery some low lying areas in Florida have not recovered as quickly as the rest of the market due in part to dramatically increasing flood insurance premiums.
HOA: home owner's association dues are common in condos & other shared-property communities. They cover routine maintenance of the building along with structural issues. Be aware that depending on build quality HOA fees can rise significantly 10 to 15 years after a structure is built, as any issues with build quality begin to emerge.
Our site also publishes an in-depth glossary of industry-related terms here.
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This calculator is for general education purposes only and is not an illustration of current Navy Federal products and offers.
Use our calculator to compare different types of mortgages and loan terms to decide which one works best for you. For example, a 30-year mortgage typically has a lower monthly payment, but adjusting to a 15-year term can save you money in the long run.
Decide how much money you should put down so your monthly payment is affordable for your budget. If you don't have a down payment saved up, most of our mortgages have options that don't require one.1
Our calculator can help you determine an affordable home price for you, taking into account your other debts (such as auto or student loans), monthly expenses (like utilities) and the size of your down payment (if any).
From mortgage closing costs to a reserve fund for home repairs, there are other expenses associated with buying a home.
Product features subject to approval. 100% financing loans may include an additional funding fee, which may be financed up to the maximum loan amount. Available for purchase loans only.↵
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