What Is Mortgage Insurance
Mortgages with adown paymentof 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 , 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.
Whats The Difference Between A Fixed And Variable Rate
- A fixed interest rate is guaranteed to remain unchanged for the length of your mortgage term.
- A variable interest rate can change during your mortgage term. This will not affect your mortgage payment for the duration of the term, but adjusts what percentage of your payment goes to paying off the mortgage principal.
Should I Choose A Fixed Or Variable 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, its not possible to exactly predict future interest rates, but a2001 studyfound that variable interest rates outperform fixed interest rates up to 90% of the time between 1950 and 2000. If youre comfortable with taking on risk, a variable mortgage rate can result in a lower lifetime mortgage cost.
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What Is An Amortization Schedule
An amortization schedule shows your monthly payments over time and also indicates the portion of each payment paying down your principal vs. interest. The maximum amortization in Canada is 25 years on down payments less than 20%. The maximum amortization period for all mortgages is 35 years.
Though your amortization may be 25 years, your term will be much shorter. With the most common term in Canada being 5 years, your amortization will be up for renewal before your mortgage is paid off, which is why our amortization schedule shows you the balance of your mortgage at the end of your term.
Does Mortgage Payments Include Property Tax
Many mortgage lenders require you to payproperty taxesthrough 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.
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.
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What Term Should I Choose
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, withmortgage ratesvarying based on the term length. Longer terms commonly have a higher mortgage rate, while shorter terms have lower mortgage rates.
Costs Associated With Home Ownership And Mortgages
Monthly mortgage payments usually comprise the bulk of the financial costs associated with owning a house, but there are other substantial costs to keep in mind. These costs are separated into two categories, recurring and non-recurring.
Recurring Costs
Most recurring costs persist throughout and beyond the life of a mortgage. They are a significant financial factor. Property taxes, home insurance, HOA fees, and other costs increase with time as a byproduct of inflation. In the calculator, the recurring costs are under the “Include Options Below” checkbox. There are also optional inputs within the calculator for annual percentage increases under “More Options.” Using these can result in more accurate calculations.
Non-Recurring Costs
These costs aren’t addressed by the calculator, but they are still important to keep in mind.
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Your Total Interest On A $400000 Mortgage
On a 25-year mortgage with a 3% fixed interest rate, youll pay roughly $169,053.58 in interest over the life of your mortgage. Thats almost half of what you borrowed in interest.
If you instead opt for a 10-year mortgage, youll pay approximately $63,491.57 in interest over the life of your mortgage or less than half of the interest youd pay on a 25-year mortgage.
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See how much you’d pay in total interest based on the interest rate.
Interest
Let’s Start With The Basics
Gross annual household income is the total income, before deductions, for all people who live at the same address and are co-borrowers on a mortgage. Enter an income between $1,000 and $1,500,000.
A down payment is the amount of money, including deposit, you put towards the purchase price of a property.
Minimum down payment amounts:
- For homes that cost up to $500,000, the minimum down payment is 5%
- For homes that cost between $500,000 and $1,000,000, the minimum down payment is 5% of the first $500,000 plus 10% of the remaining balance
- For homes that cost over $1,000,000, the minimum down payment is 20% or more depending on property location
For down payments of less than 20%, home buyers are required to purchase mortgage default insurance.
A down payment is the amount of money, including deposit, you put towards the purchase price of a property.
Minimum down payment amounts:
- For homes that cost up to $500,000, the minimum down payment is 5%
- For homes that cost between $500,000 and $1,000,000, the minimum down payment is 5% of the first $500,000 plus 10% of the remaining balance
- For homes that cost over $1,000,000, the minimum down payment is 20% or more depending on property location
For down payments of less than 20%, home buyers are required to purchase mortgage default insurance.
Selecting your province or territory helps us personalize your mortgage results.
Enter your total monthly payments towards any car loans, student loans or personal loans.
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What Are Mortgage Statements
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:
- Current interest rate
How Does A Mortgage Work
A mortgage is a secured loan that is collateralized by the home it is financing. This means that the lender will have a lien on your home until the mortgage is paid in full. After closing, youll make monthly paymentswhich covers principal, interest, taxes and insurance. If you default on the mortgage, the bank will have the ability to foreclose on the property.
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How To Lower Your Mortgage Payments
There are a few ways to lower your monthly mortgage payments. You can reduce the purchase price, make a bigger down payment, extend the amortization period, or find a lower mortgage rate. Use the calculator to see what your payment would be in different scenarios.
Keep in mind that if your down payment is less than 20%, your maximum amortization period is 25 years. As for finding a lower mortgage rate, its a good idea to speak to a mortgage broker for assistance.
How Much Income Do I Need To Afford A $400000 Mortgage
As a general rule of thumb, you want to keep your monthly mortgage payment to 28% of your gross monthly income or less. But theres some flexibility here. Most lenders evaluate whats known as a debt-to-income ratio when considering you for a mortgage.
To calculate this ratio, take all your monthly debt payments and divide it by your monthly income. The limit for many loans is 43%. Say you make $75,000 per year, or $6,250 per month. If you have a monthly car loan payment of $200, a student loan payment of $300, and youre considering a mortgage with a $2,000 monthly payment, that gives you a debt-to-income ratio of 40% .
If your payment on a $400,000 mortgage is $2,200 after your escrow payment is factored in, that means youll need an annual income of about $94,000 to keep it within 28%. But with no other debt, you may qualify with an income as low as $61,395.
As you can see, many factors determine how much you can afford to pay for a house, so its important to do your due diligence before applying for a $400,000 mortgage.
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Comparing A $2000 Monthly Payment Frequency
| Payment Frequency | |
|---|---|
| $500 | $26,000 |
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, youre 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 youll 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.
Whats The Amortization Schedule For A $400000 Mortgage
When you take out a fixed-rate mortgage, your total monthly principal and interest payment doesnt change for the life of the loan. But the amount of your payment that goes toward principal versus interest does change. This is known as an amortization schedule.
At the beginning of your loan, the amount going toward interest will be far higher than the amount going toward the principal. The situation slowly reverses over the course of the mortgage. By the end, youll be paying more in principal than interest.
The first year of an amortization schedule for a 30-year, $400,000 mortgage with a 4% APR would look like this :
- Beginning balance: $400,000
- Monthly interest: $1,333.33
- End-of-year balance: $393,553.66
Note that at the end of the year, your loan balance is reduced only by the portion of your monthly payment that went toward the principal. The interest portion doesnt reduce your loan balance.
- Beginning balance: $22,427.84
- Monthly interest: $74.76
- Ending balance: $0
On a 15-year mortgage, the amortization schedule works similarly but youll be paying the principal down much faster and paying much less in interest.
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What Are The Monthly Repayments On A 400000 Mortgage
Lots of customers approach us to find out how much they can expect to repay for a mortgage of a particular size.
This article is based specifically on £400k mortgages, what factors lenders consider before authorising a mortgage of this size, and how much approximately the monthly repayments on a £400k mortgage will cost you.
The experts can give the right advice, even if youve been declined or have a bad credit history.
The following topics are covered below…
Talk To A Whole Of Market Mortgage Expert Today
If you like what youre reading or require more information surrounding your £400,000 mortgage, call Online Mortgage Advisor on 0808 189 2301 or make an enquiry. Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances. We dont charge a fee, and theres no obligation or marks on your credit rating.
Onlinemortgageadvisor.co.uk is an information website all of our content is written by qualified advisors from the front line, for the sole purpose of offering great, relevant, and up-to-date information on all things mortgages.
Online Mortgage Advisor is a trading name of FIND A MORTGAGE ONLINE LTD, registered in England under number 08662127. We are an officially recognised Introducer Appointed Representative and can be found on the FCA financial services register, number 697688.
The Financial Conduct Authority does not regulate some forms of buy to let mortgage.
Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage.
We are an information-only website and aim to provide the best guides and tips but cant guarantee to be perfect, so do note you use the information at your own risk and we cant accept liability if things go wrong. Please email us at if you see anything that needs updating and we will do so ASAP.
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Required Income For 500k Mortgage Under The Stress Test
Lets determine the Gross Debt Service for a $500,000 condo using the mortgage stress test rate of 5.19% over 25 year amortization. Your household expenses break down like this:
- Property tax $255/month ÷ 12)
- Heating $60/month
- Mortgage payments $2,927/monthTOTAL: $3,442
With your monthly household expenses amounting to $3,442 this means the required minimum income for a 500K mortgage under the Stress Test is $130,000 per year. This could also be two salaries of $65,000 per year.
$130,000 ÷ 12 = $10,833$10,833 x 0.32 = $3,447
Expenses $3,442 < $3,447 GDS
Dont forget about any debts, keeping in mind they should not exceed 40% of your monthly household income.
So while the above is how the bank will approach determining what you can afford, below is closer to the income one actually needs to afford a 500K mortgage.
What Is The Minimum Down Payment Required In Canada
The minimum down payment in Canada depends on the purchase price of the home:
- If the purchase price is less than $500,000, the minimum down payment is 5%.
- If the purchase price is between $500,000 and $999,999, the minimum down payment is 5% of the first $500,000, and 10% of any amount over $500,000.
- If the purchase price is $1,000,000 or more, the minimum down payment is 20%.
Mortgage default insurance, commonly referred to as CMHC insurance, protects the lender in the event the borrower defaults on the mortgage. It is required on all mortgages with down payments of less than 20%, which are known as high-ratio mortgages. A conventional mortgage, on the other hand, is one where the down payment is 20% or higher.
According to a recent TD Canada Trust Home Buyers Report1, 30% of homebuyers plan to or have at least a 20% down payment, the point at which mortgage default insurance is no longer required.
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Why Does Your Monthly Calculator Have Four Columns
We think it’s important for you to compare your options side by side. We start the calculator by outlining the four most common options for down payment scenarios, but you are not limited to those options. We also allow you to vary amortization period as well as interest rates, so you’ll know how a variable vs. fixed mortgage rate changes your payment.
Mortgage Calculations And Mortgage Considerations
Use the free online Mortgage calculator to calculate your monthly repayments, compare Mortgage repayments over different periods and define what is the most affordable option for your financial situation. The Mortgage calculator will provide you a monthly interest repayment over 1 year,2 years,3 years,4 years,5 years, 10 years and compare them to a monthly repayment period of your choosing .
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How Much Is Cmhc Insurance
CMHC insurance premiums are a percentage of your mortgage and are paid by your mortgage lender.Provincial sales taxis 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 ourCMHC insurance calculator.
Choosing The Right Mortgage With Mortgage Choice
Choosing a home loan is like selecting a fine wine: it suits your palate, handpicked for you and gets better over time. A Mortgage Choice broker knows which home loan is right for you.Use our tool to get your free quote and find out how much you could borrow in minutes or speak to you local broker for expert advice.
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