Canadian Mortgage Regulations Taxes And Fees
Canada-wide mortgage regulations are set by the Ministry of Finance to help protect home buyers and lenders alike. These regulations include guidelines on minimum down payments, maximum amortization periods, as well as mortgage default insurance.
Here are the key regulations you need to be aware of, and that are included in the Ontario mortgage calculator above:
- The minimum down payment in Canada is between 5% and 10%, depending on the purchase price of the home.
- The maximum amortization is 25 years for down payments under 20% and 35 years for higher down payments.
- Mortgage default insurance – also called CMHC insurance – must be purchased for down payments between 5% and 20%. Visit our CMHC insurance page to learn more.
How To Use This Mortgage Calculator
This mortgage payment calculator will help you find the cost of homeownership at todays mortgage rates, accounting for principal, interest, taxes, homeowners insurance, and, where applicable, homeowners association fees.
You should adjust the default values of the mortgage calculator, including mortgage rate and length of loan, to reflect your current situation.
You can use the mortgage payment calculator in three ways:
Consider The Cost Of Homeowners Insurance
Almost every homeowner who takes out a mortgage will be required to pay homeowners insurance another cost thats often baked into monthly mortgage payments made to the lender.
There are eight different types of homeowners insurance. The insurance policies with a high deductible will typically have a lower monthly premium.
Also Check: How To Apply For A Home Mortgage
Why Its Smart To Follow The 28/36% Rule
Most financial advisers agree that people should spend no more than 28 percent of their gross monthly income on housing expenses and no more than 36 percent on total debt that includes housing as well as things like student loans, car expenses and credit card payments. The 28/36 percent rule is the tried-and-true home affordability rule that establishes a baseline for what you can afford to pay every month.
Example: To calculate how much 28 percent of your income is, simply multiply your monthly income by 28. If your monthly income is $6,000, for example, your equation should look like this: 6,000 x 28 = 168,000. Now, divide that total by 100. 168,000 ÷ 100 = 1,680.
Depending on where you live and how much you earn, your annual income could be more than enough to cover a mortgage or it could fall short. Knowing what you can afford can help you take financially sound next steps. The last thing you want to do is jump into a 30-year home loan thats too expensive for your budget, even if you can find a lender willing to underwrite the mortgage.
Monthly Payment: Whats Behind The Numbers Used In Our Mortgage Payment Calculator
The NerdWallet mortgage payment calculator cooks in all the costs that are wrapped into your monthly payment, including principal and interest, taxes and insurance. Youll just need to plug in the numbers. The more info youre able to provide, the more accurate your total monthly payment estimate will be.
For example, you may have homeowners association dues built into your monthly payment. Or mortgage insurance, if you put down less than 20%. And then theres property taxes and homeowners insurance. It helps to gather all of these additional expenses that are included in your monthly payment, because they can really add up. If you dont consider them all, you may budget for one payment, only to find out that its much larger than you expected.
For you home gamers, heres how we calculate your monthly mortgage payments on a fixed-rate loan:
M = P /
The variables are:
M = monthly mortgage payment
P = the principal, or the initial amount you borrowed.
i = your monthly interest rate. Your lender likely lists interest rates as an annual figure, so youll need to divide by 12, for each month of the year. So, if your rate is 5%, then the monthly rate will look like this: 0.05/12 = 0.004167.
n = the number of payments over the life of the loan. If you take out a 30-year fixed rate mortgage, this means: n = 30 years x 12 months per year, or 360 payments.
Youre Our First Priorityevery Time
We believe everyone should be able to make financial decisions with confidence. And while our site doesnt feature every company or financial product available on the market, were proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward and free.
So how do we make money? Our partners compensate us. This may influence which products we review and write about , but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.Here is a list of our partners.
Can My Monthly Payment Go Up
Your monthly payment can rise in a few cases:
What Is Principal And Interest
The principal is the loan amount that you borrowed and the interest is the additional money that you owe to the lender that accrues over time and is a percentage of your initial loan. Fixed-rate mortgages will have the same total principal and interest amount each month, but the actual numbers for each change as you pay off the loan. This is known as amortization. You start by paying a higher percentage of interest than principal. Gradually, youll pay more and more principal and less interest. See the table below for an example of amortization on a $200,000 mortgage.
Save For A 20% Down Payment
You dont need to pay for private mortgage insurance when you put 20% down on your loan. PMI can add quite a bit of money to your monthly payment, so avoiding it can significantly reduce what you pay each month. You may also be able to avoid paying for mortgage insurance if you have a VA loan and pay the funding fee upfront.
You May Like: How Do You Refinance Your Mortgage
How Much House Can I Afford With A Va Loan
Eligible active duty or retired service members or their spouses can qualify for down payment-free . These loans have competitive mortgage rates but usually and dont require PMI, even if you put less than 20 percent down. These loans be a great option if you qualify and can help you get into a new home without overstretching your budget.Learn more about specific loan type rates
How To Increase Your Mortgage Affordability
If you want to increase how much you can borrow, thus increasing how much you can afford to spend on a home, there are few steps you can take.
1. Save a larger down payment: The larger your down payment, the less interest youll be charged over the life of your loan. A larger down payment also saves you money on the cost of CMHC insurance.
2. Get a better mortgage rate: Shop around for the best mortgage rate you can find, and consider using a mortgage broker to negotiate on your behalf. A lower mortgage rate will result in lower monthly payments, increasing how much you can afford. It will also save you thousands of dollars over the life of your mortgage.
3. Increase your amortization period: The longer you take to pay off your loan, the lower your monthly payments will be, making your mortgage more affordable. However, this will result in you paying more interest over time.
These are just a few ways you can increase the amount you can afford to spend on a home, by increasing your mortgage affordability. However, the best advice will be personal to you. Find a licensed mortgage broker near you to have a free, no-obligation conversation thats tailored to your needs.
Don’t Miss: What Is A Mortgage Modification Agreement
That Expenses Do Not Exceed Income
Personal and family finances can be managed in the same way that a large company would. At the end of the day, the rule for all of them is always summarized in the same thing: That the expenses do not exceed the income since, otherwise, we could end up in a bankruptcy situation.
However, it must be borne in mind that in many cases this is not possible or is not as simple as it might seem at first glance. Let us bear in mind that companies have specific financial departments that are in charge of carrying out this work and it is most likely that none of us have the appropriate knowledge to bring our economy to fruition. But dont worry, there are simple rules so that the management of our mortgage with CCJs is healthy and does not become a real nightmare. Do you want to know what they are?
How Much Do I Need To Put Down
A down payment of 20% or more will get you the best interest rates and the most loan options. But you dont have to put 20% down to buy a house. There are a variety of low-down-payment options available for home buyers. You may be able to buy a home with as little as 3% down, although there are some loan programs that require no money down.
Whats A Homeowners Insurance Premium
A homeowners insurance premium is the cost you pay to carry homeowners insurance a policy that protects your home, personal belongings and finances. The homeowners insurance premium is the yearly amount you pay for the insurance. Many home buyers pay for this as part of their monthly mortgage payment.
Lenders typically require you to purchase homeowners insurance when you have a mortgage. The coverage youre required to purchase may vary by location. For example, if you live in a flood zone or a state thats regularly impacted by hurricanes, you may be required to buy additional coverage that protects your home in the event of a flood. If you live near a forest area, additional hazard insurance may be required to protect against wildfires.
How To Afford A Bigger Mortgage
You can afford a more expensive home by following three simple steps as you prepare to apply for a mortgage:
Of course, these steps may be easier said than done, especially for a firsttime home buyer.
How are you supposed to pay down debt and increase your savings at the same time? Often its a struggle to even meet monthly expenses.
But nearly everyone at least, nearly everyone with homeownership plans can find some economies in their household budgets. And its surprising how often just a small improvement in your DTI, down payment, or credit score can make a big difference to the mortgage deal youre offered.
So do what you can. But if your financial situation isnt perfect, dont let that stop you. Mortgage programs today are flexible, and you might be surprised at what it takes to qualify.
Don’t Miss: Who Should You Get A Mortgage From
Average Property Tax In Massachusetts Counties
Taking U.S. Census data, NerdWallet has crunched the numbers to help you understand what property tax rate you can expect to pay on your future home in Massachusetts. Because assessed values arent frequently updated, you may pay a higher rate at first but eventually youll pay a similar rate.
Under “Home price,” enter the price or the current value . NerdWallet also has a .
Under “Down payment,” enter the amount of your down payment or the amount of equity you have . A is the cash you pay upfront for a home, and is the value of the home, minus what you owe.
On desktop, under “Interest rate” , enter the rate. Under “Loan term,” click the plus and minus signs to adjust the length of the mortgage in years.
On mobile devices, tap “Refine Results” to find the field to enter the rate and use the plus and minus signs to select the “Loan term.”
You may enter your own figures for , and , if you dont wish to use NerdWallets estimates. Edit these figures by clicking on the amount currently displayed.
The mortgage calculator lets you click “Compare common loan types” to view a comparison of different loan terms. Click “Amortization” to see how the principal balance, principal paid and total interest paid change year by year. On mobile devices, scroll down to see “Amortization.”
The mortgage payment calculation looks like this: M = P /
The variables are as follows:
Your monthly payment can go up over time if:
How To Account For Taxes And Recurring Expenses
Accounting for recurring charges like PMI and HOA fees requires a little more work, but even these aren’t very difficult to calculate. You can find the total cost of recurring expenses by adding them together and multiplying them by the number of monthly payments . This will give you the lifetime cost of monthly charges that exclude the cost of your loan.
The reverse is true for annual charges like taxes or insurance, which are usually charged in a lump sum, paid once per year. If you want to know how much these expenses cost per month, you can divide them by 12 and add the result to your mortgage payment. Most mortgage lenders use this method to determine your monthly mortgage escrow costs. Lenders collect these additional payments in an escrow account, typically on a monthly basis, in order to make sure you don’t fall short of your annual tax and insurance obligations.
Read Also: How To Transfer A Mortgage To Someone Else
Los Angeles Homebuyers Can Refinance At Historically Low Mortgage Rates Today
The spread of coronavirus caused financial market volatility, with the 10-Year Treasury Notes reaching all-time record lows. Mortgage rates tend to follow 10-Year Treasury movements. Savvy homeowners across the country are taking advantage of this opportunity to refinance their homes at today’s attractive rates.
As Seen In
Choosing The Mortgage Term Right For You
A mortgage term is the length of time you have to pay off your mortgagestated another way, its the time span over which a mortgage is amortized. The most common mortgage terms are 15 and 30 years, though other terms also exist and may even range up to 40 years. The length of your mortgage terms dictates how much youll pay each monththe longer your term, the lower your monthly payment.
That said, interest rates are usually lower for 15-year mortgages than for 30-year terms, and youll pay more in interest over the life of a 30-year loan. To determine which mortgage term is right for you, consider how much you can afford to pay each month and how quickly you prefer to have your mortgage paid off.
If you can afford to pay more each month but still dont know which term to choose, its also worth considering whether youd be able to break evenor, perhaps, saveon the interest by choosing a lower monthly payment and investing the difference.
Recommended Reading: How To Modify Mortgage Loan
Know How Much You Own
Its crucial to understand how much of your home you actually own. Of course, you own the homebut until its paid off, your lender has a lien on the property, so its not yours free-and-clear. The value that you own, known as your “home equity,” is the homes market value minus any outstanding loan balance.
You might want to calculate your equity for several reasons.
- Your loan-to-value ratio is critical, because lenders look for a minimum ratio before approving loans. If you want to refinance or figure out how big your down payment needs to be on your next home, you need to know the LTV ratio.
- Your net worth is based on how much of your home you actually own. Having a one million-dollar home doesnt do you much good if you owe $999,000 on the property.
- You can borrow against your home using second mortgages and home equity lines of credit . Lenders often prefer an LTV below 80% to approve a loan, but some lenders go higher.