What Will My Total Mortgage Payment Be

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.

Equation For Mortgage Payments

M = P

• M = the total monthly mortgage payment
• P = the principal loan amount
• r = your monthly interest rate. Lenders provide you an annual rate so youll need to divide that figure by 12 to get the monthly rate. If your interest rate is 5%, your monthly rate would be 0.004167 .
• n = number of payments over the loans lifetime. Multiply the number of years in your loan term by 12 to get the number of total payments for your loan. For example, a 30-year fixed mortgage would have 360 payments .

This formula can help you crunch the numbers to see how much house you can afford. Using our mortgage calculator can take the work out of it for you and help you decide whether youre putting enough money down or if you can or should adjust your loan term. Its always a good idea to rate-shop with several lenders to ensure youre getting the best deal available.

How Much Mortgage Can I Afford

Generally speaking, most prospective homeowners can afford to finance a property that costs between two and two-and-a-half times their annual gross income. Under this formula, a person earning $100,000 per year can only afford a mortgage of $200,000 to $250,000. However, this calculation is only a general guideline.

Ultimately, when deciding on a property, you need to consider several additional factors. First, it’s a good idea to have some understanding of what your lender thinks you can afford . Second, you need to have some personal introspection and figure out what type of home you are willing to live in if you plan on living in the house for a long time and what other types of consumption you are ready to forgoor notto live in your home.

While real estate has traditionally been considered a safe long-term investment, recessions and other disasters can test that theoryand make would-be homeowners think twice.

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Get A More Accurate Estimate

Get pre-qualified by a lender to see an even more accurate estimate of your monthly mortgage payment.

• How much house can you afford? Use our affordability calculator to estimate what you can comfortably spend on your new home.

• Pig

  Interested in refinancing your existing mortgage? Use our refinance calculator to see if refinancing makes sense for you.
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  Your debt-to-income ratio helps determine if you would qualify for a mortgage. Use our DTI calculator to see if you’re in the right range.

• Award Ribbon VA mortgage calculator

  Use our VA home loan calculator to estimate payments for a VA loan for qualifying veterans, active military, and military families.

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Consider The Cost Of Property Taxes

A monthly mortgage payment will often include property taxes, which are collected by the lender and then put into a specific account, commonly called an escrow or impound account. At the end of the year, the taxes are paid to the government on the homeowners’ behalf.

How much you owe in property taxes will depend on local tax rates and the value of the home. Just like income taxes, the amount the lender estimates the homeowner will need to pay could be more or less than the actual amount owed, which could result in a bill or a refund come tax season.

You can typically find your property tax rate on your local government’s website.

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.

Read Also: What Is A Good Dti For A Mortgage

Understand Your Mortgage Payment

Your mortgage payment is defined as your principal and interest payment in this mortgage payoff calculator. When you pay extra on your principal balance, you reduce the amount of your loan and save money on interest.

Keep in mind that you may pay for other costs in your monthly payment, such as homeowners insurance, property taxes, and private mortgage insurance . For a breakdown of your mortgage payment costs, try our free mortgage calculator.

Home Down Payment: When Bigger Isnt Better

While making a larger down payment offers many benefits, its not always the right decision. In general:

• Dont deplete your emergency savings to increase your down payment. Youre leaving yourself vulnerable to financial emergencies.
• Its not wise to put savings toward a larger down payment if youre carrying high-interest debt like credit cards. Youll make yourself safer and pay less interest by reducing debt before saving a down payment.
• Putting off buying a home for many years to save a large down payment can be a mistake. While youre saving your down payment, the price of that house is probably going up. While appreciation is not guaranteed, home prices in the U.S. have historically increased each year.

The size of your mortgage down payment is obviously a very personal decision. Tools like Bankrates affordability calculator or down payment calculator can help you determine the right amount for you, and so can a trusted mortgage professional. Ultimately, the decision comes down to your desire, your discipline and your resources.

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Can My Fha Monthly Payment Go Up

Yes. Here are a few instances when your monthly payment can go up, even after youve closed the loan and moved in:

• If you have an adjustable-rate mortgage, your interest rate can rise after your initial fixed-interest rate term ends.

• Escrow items built into your monthly payment, such as property taxes or homeowners insurance premiums, are likely to go up over time. While you can’t do much about property taxes aside from moving to a different area you can always shop around for a new homeowners insurance policy.

• If you run behind on making a monthly payment, you can expect a late payment fee.

Understanding How Private Mortgage Insurance Works

A Note on Private Mortgage Insurance

Those who pay at least 20% on a home do not require PMI, but homebuyers using a conventional mortgage with a loan-to-value above 80% are usually required to pay PMI until the loan balance falls to 78%.

PMI typically costs from 0.35% to 0.78% of the loan balance per year. The annual payment amount is divided by 12 and this pro-rated amount is automatically added to your monthly home loan payment.

Sources: * Census.gov, all others NAR

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How To Account For Closing Costs

Once you’ve calculated the total principal and interest expense on your mortgage, factoring in closing costs or fees will be straightforward. Since closing costs are paid in full when you close on the loan, you can simply add them to your overall loan cost without using any long formulas. Some examples of upfront closing costs include the following:

• Mortgage lender fees
• Third-party mortgage fees
• Prepaid mortgage costs

While there may be other categories of upfront fees, the process for calculating them remains the same: Just add them to the total cost of the mortgage loan. Keep in mind that this will exclude any added monthly expenses paid in escrow, like taxes or homeowner’s insurance. Our next section explains how to factor in monthly expenses.

Which Payment Schedule Is Right For Me

While it will depend on your specific situation, here are some general guidelines:

• Most people choose to synchronize their mortgage payments with their monthly or bi-weekly paycheck. This will make it easier to budget.
• More frequent mortgage payments will slightly lower your term and lifetime mortgage cost. Accelerated payment frequencies are also available.

Also Check: How To Amortize A Mortgage In Excel

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.

Calculate The Monthly Interest Rate

The interest rate is essentially the fee a bank charges you to borrow money, expressed as a percentage. Typically, a buyer with a high , high down payment, and low debt-to-income ratio will secure a lower interest rate the risk of loaning that person money is lower than it would be for someone with a less stable financial situation.

Lenders provide an annual interest rate for mortgages. If you want to do the monthly mortgage payment calculation by hand, you’ll need the monthly interest rate just divide the annual interest rate by 12 . For example, if the annual interest rate is 4%, the monthly interest rate would be 0.33% .

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Calculations For Different Loans

The calculation you use depends on the type of loan you have. Most home loans are standard fixed-rate loans. For example, standard 30-year or 15-year mortgages keep the same interest rate and monthly payment for their duration.

For these fixed loans, use the formula below to calculate the payment. Note that the carat indicates that youre raising a number to the power indicated after the carat.

Payment = P x x ^n] / ^n – 1

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.

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What Would You Like To Do

Your approximate payment is $*.

Do I Qualify For A Mortgage

A mortgage calculator can be helpful when estimating your home buying budget. But remember even if you can afford the monthly payments, you still need to qualify for a home loan.

To see if you qualify for a mortgage, a lender will check your:

• : Borrowers with higher credit scores tend to have more loan options. But mortgages are secured loans, which means you dont always need stellar credit to qualify. Some lenders can approve FHA loans for borrowers with FICO scores as low as 580
• Loan-to-value ratio : LTV measures your loan amount against your new homes value. For example, borrowing $200,000 to buy a $200,000 home equals 100% LTV. Lenders can offer VA or USDA loans at 100% LTV, but not everyone is eligible for these programs. FHA loans cant exceed 96.5% LTV, which leaves 3.5% as the minimum down payment. Conventional loans can reach 97% LTV, meaning they allow a 3% down payment
• Home appraisal: A home appraisal identifies the homes value. Lenders wont approve loan amounts that exceed the homes value, regardless of the homes listing price or agreed-upon purchase price
• Personal finances: Lenders must verify your income to make sure you can afford the loan payments. Theyll check W-2s, bank statements, and employment records. If youre self-employed, a lender will likely ask to see tax records

You can ask for a mortgage pre-approval or a prequalification to see your loan options and real budget based on your personal finances.

Also Check: What Credit Agency Do Mortgage Lenders Use

What Are My Monthly Costs For Owning A Home

There are five key components in play when you calculate mortgage payments

• Principal: The amount of money you borrowed for a loan. If you borrow $200,000 for a loan, your principal is $200,000.
• Interest: The cost of borrowing money from a lender. Interest rates are expressed as a yearly percentage. Your loan payment is primarily interest in the early years of your mortgage.
• Property taxes: The yearly tax assessed by the city or municipality on a home that is paid by the owner. Property taxes are considered part of the cost of owning a home and should be factored in when calculating monthly mortgage payments. However, lenders dont control this cost and so it shouldnt be a major factor when choosing a lender.
• Mortgage insurance: An additional cost of taking out a mortgage, if your down payment is less than 20% of the home purchase price. This protects the lender in case a borrower defaults on a mortgage. Once the equity in your property increases to 20%, you can stop paying mortgage insurance, unless you have an FHA loan.
• Homeowners association fee: This cost is common for condo owners and some single-family neighborhoods. Its money that must be paid by owners to an organization that assists with upkeep, property improvements and shared amenities.

How Do Payments Differ By Province In Canada

Most mortgage regulation in Canada is consistent across the provinces. This includes the minimum down payment of 5%, and the maximum amortization period 35 years, for example. However, there are some mortgage rules that vary between provinces. This table summarizes the differences:

Also Check: How Much Mortgage And Taxes Can I Afford

Additional Ways To Find Your Mortgage Balance

Mortgage companies will send out a mortgage statement â electronically or by mail â on an annual basis. These statements reveal the mortgage balance, number of payments that were made, and interest charged.

But what if you want to proactively find your exact mortgage balance â as stated by your mortgage company? Two popular options include:

• â Your mortgage company can give you your mortgage balance over the phone. Simply call and ask.
• Go online â Your mortgage company website will probably show your mortgage balance. You’ll have to create an online account â with a login and password â that will enable you to view your mortgage balance anytime you wish.

What Would My Loan Payments Be

The loan amount, the interest rate, and the term of the loan can have a dramatic effect on the total amount you will eventually pay on a loan. Use our loan payment calculator to determine the payment and see the impact of these variables on a specified loan amount complete with an amortization schedule.

Advantages of a Good Credit Score

Interest is the charge added to a loan that makes up the cost of money. Interest is usually expressed as a percentage of the loan principal. The principal is the original amount of the loan. The interest rate tells you what percentage of the unpaid loan will be charged each period. The period is usually a year but may be any agreed-upon time. Here is how it works. Let’s say you loan your friend $100 at 5% annual interest. At the end of a yearthe periodyou should receive $105, or $100 of principal and $5 interest. Simple, isn’t it?

Let’s say your friend doesn’t repay the $100 principal, but pays you only the $5 interest then the next year your friend will still owe you the $100 plus another $5 in interest. The preceding is an example of simple interest. Simple interest is the amount of money to be paid each period on a principal amount due.

5 Ways to Create a Budget That Works

In personal finance, you set financial goals so you can plan your budget around those goals. After all, they are your priorities, aren’t they? Here is how financial planners work with budgets:

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