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Mortgage Payment Calculator

As a homebuyer, many valuable resources are available to help you make informed decisions throughout the homebuying process. One of the most useful tools you’ll find is nesto’s online mortgage calculators. We have different types of calculators available, but a good place to start is with nesto’s mortgage payment calculator. This enables you to calculate your estimated monthly mortgage payment alongside a corresponding amortization schedule

How to Calculate Your Mortgage Payments

Navigating the intricate calculations behind mortgage payments can be a complicated task, though much easier still compared to the use of amortization tables in the 1970s. nesto’s mortgage payment calculator simplifies this complex task, turning it into a straightforward process without needlessly complicated math.

Start by choosing your transaction type, home purchase, mortgage renewal or refinance. Then, continue by filling in the “Asking price” or “Current property value” field with either the property price you’re planning to purchase or the current value of your home if you’re considering renewing or refinancing.

Proceed to the “Down payment” section and input the sum you plan for a downpayment on your new home. This information can be entered as a specific dollar value or a percentage of the home’s purchase price. For renewals and refinances, you’ll instead need to input your “Current mortgage balance” and “Province” into their respective field, and our calculator will automatically calculate your equity in the property. Remember, a downpayment is the upfront cash contribution towards your home purchase, while home equity represents the value of your property minus any outstanding mortgage debt. The province is only needed as sometimes rates may vary between provinces.

Next, for purchases, you’ll need to enter the “Amortization period,” which is how long you want to take to pay off your mortgage. This value must be the expected remaining amortization period for renewals, which should align with your current mortgage. The following field, “Mortgage frequency,” is your choice. Though monthly is generally the default, you should know that you can save years of your mortgage by accelerating your payment. You can choose between weekly, accelerated weekly (a quarter of a monthly payment applied weekly), biweekly (every 2 weeks), accelerated biweekly (semi-monthly payment made every 2 weeks), and semi-monthly (every 15 days or half of a monthly payment).

Next, for refinances, you’ll have to decide if you’re buying/saving time or money by selecting 1 of the following reasons for your request: “Lower my mortgage payment” (buy time), “Access my equity” (buy money) or “Change my amortization” (buy/save time). Typically, people choose to lower their mortgage payment or change their amortization by extending their amortization period, which means a lower mortgage payment if all else remains equal or a higher mortgage payment if mortgage rates have increased since their mortgage term started. If rates have decreased since your term started, you could benefit from a refinance, saving time and money.

If you choose “Access my equity” as the reason for your refinance, you must indicate by how much in the “Additional funds amount” field. Your allowable amount is limited to your current mortgage balance and 80% of your property’s value. Accessing your equity, also commonly known as an equity takeout (ETO), means that you’ll increase your mortgage balance, and the difference between your old and new mortgage balance will be paid to you in cash once your refinance completes.

For all purchase, renewal and refinance inquiries, you’ll have to click on the rate field and decide if you wish to have a variable or fixed mortgage and “Mortgage term length.” Your choices will automatically generate a rate, or you can enter a “Custom rate.” Typically, most lenders will offer options for variable on a 3 or 5-year term, whereas fixed options come in all terms between 1 to 10 years.

As you populate these fields, nesto’s mortgage payment calculator dynamically updates to display the following on the right: total monthly/frequency payment, total options fees, mortgage default insurance premium (CMHC), total mortgage amount, total payments/balance/interest/principal paid over the term, total payments/balance/interest/principal paid over the amortization period as well as total number of payment transaction over the amortization period.

nesto’s mortgage payment calculator also allows you to add optional costs such as “Annual property taxes” and “Monthly condo/maintenance fees.” Feel free to adjust or disregard these figures while you’re still in the shopping stage. While your lender could bundle these costs into your total mortgage payment, they won’t impact your principal and interest as you explore your mortgage options.

Voila, you’re all done – without the need for pulling out your abacus or amortization table from the attic

Are you a first-time buyer?

How to manually calculate your mortgage payment

You can use the following formula to determine your mortgage payments: 

M = P [i(1 + i)n ] / [(1 + i)n – 1]

VariablesMortgage PaymentMortgage BalanceMortgage RatePayments
ValueWe are solving for the mortgage payment.Principal (total mortgage amount)The mortgage interest rate should be provided. The number of payments over the mortgage amortization period.
Monthly PaymentsMonthly mortgage paymentPrincipal (total mortgage amount)Monthly interest rate (annual interest rate divided by 12)Total number of monthly payments (mortgage amortization in years multiplied by 12)
Semi-monthly mortgage paymentPrincipal (total mortgage amount)Semi-monthly interest rate (annual interest rate divided by 24)Total number of semi-monthly payments (mortgage amortization in years multiplied by 24)
Biweekly Payments Biweekly mortgage paymentPrincipal (total mortgage amount)Biweekly interest rate (annual interest rate divided by 26)Total number of biweekly payments (mortgage amortization in years multiplied by 26)
Weekly mortgage paymentPrincipal (total mortgage amount)Weekly interest rate (annual interest rate divided by 52)Total number of weekly payments (mortgage amortization in years multiplied by 52)
NotesFixed mortgage rates are compounded semi-annually (twice a year).
Variable mortgage rates are compounded monthly (12 times per year).
A total principal should also include any default insurance premiums.Enter as a decimal by taking a percentage and dividing by 100.You can figure this out by multiplying the amortization period in years by the number of expected payments in a year.
To simplify this task, you can either use a financial calculator or nesto’s mortgage payment calculator.

For example, let’s say you have a $500,000 mortgage with an interest rate of 5.24% and an amortization of 25 years.

In this calculation, your rate (i) would be represented as 0.0524, and your number of monthly payments represented by (n) would equal 25 x 12, which is 300. To calculate your monthly payment, you would plug in the values into the formula as follows:

M = 500,000 [(0.0524/12)(1 + (0.0524/12))^300] / [(1 + (0.0524/12))^300 – 1]

M = 500,000 [0.0043666(1 + 0.0043666)^300] / [(1 + 0.0043666)^300 – 1]

M = 500,000 [0.0161369697] / [2.6955457]

M = 500,000 [0.0059865317]

M =  2993.27

Your monthly mortgage payment is $2,993.27.

Using our mortgage payment calculator can simplify this process. If you’re uncomfortable with complex mathematical formulae or quickly want to compare mortgages, many online calculators allow you to input your mortgage amount, interest rate, and amortization, and they will calculate your monthly payment.

What is a mortgage payment?

A mortgage payment is the amount of money paid regularly to pay down, eventually paying off the borrowed mortgage balance. 

At nesto, you can schedule your payment frequency as weekly, biweekly, monthly and accelerated weekly/biweekly payments. Typically represented as one sum, a mortgage payment is made up of 2 main components – principal and interest portions. 

The mortgage payment is specific to the amortization, rate and the term for which the rate is guaranteed. With this information, you can calculate the mortgage payment and the estimated cost of interest for the term and the life of the mortgage if the interest rate stays constant.

In the case of an adjustable-rate mortgage (ARM), the interest rate won’t stay constant for the life of the mortgage — possibly, not even for the term — so interest costs can only be estimated.

For variable rate mortgages (VRM), where the payment stays constant, we cannot estimate the interest carrying costs for the term if the actual interest being charged fluctuates.

If your downpayment is below 20% of the purchase price or valuation, then our calculator will estimate the high ratio default insurance premium for you. 

Note: You will need to pay for default insurance on high-ratio mortgages. This is in the form of an insurance premium charged as a percentage of your borrowed mortgage.

If you require mortgage default insurance (mandatory when putting down less than 20% downpayment), ranging from 2.8% to 4% of the borrowed mortgage amount can be added to your mortgage and paid as part of your total mortgage amount. 

You can also choose to pay it upfront in cash and not add it to your mortgage balance, effectively saving interest on that amount over the life of your mortgage.

Mortgage Default insurance provided by one of Canada’s 3 high ratio default insurers, Canada Mortgage Housing Corporation (CMHC), Sagen (GE) or Canada Guaranty (CG), is only available for properties with a purchase price or valuation under $1 million. 

This means that you cannot use a high-ratio mortgage if you are planning on purchasing a home that has a price greater than $1 million. Instead, to purchase a home that costs more than $1 million, you will need to make a downpayment of 20% or more for a conventional mortgage.

Today’s Best Mortgage Rates as of December 5, 2023

How to estimate mortgage payments

To estimate your mortgage payment, you need to gather some key information. 

First, you will need to figure out the mortgage amount, which is the purchase price or home valuation less your downpayment (or equity in the home) and applicable default insurance if purchased with less than 20% downpayment.

Second, you’ll need the interest rate you anticipate paying or have already been offered and the amortization period – the number of years you want to take to pay off the mortgage. For insured mortgages, the maximum amortization is capped at 25 years. 

Although there’s a mathematical equation for determining your mortgage payments manually, it’s much easier to let nesto’s Mortgage Payment Calculator do the work for you. 

How to use nesto’s Mortgage Payment Calculator

nesto’s Mortgage Payment Calculator provides you with an accurate calculation of your mortgage payments so you’ll be properly prepared and understand your biggest financial obligations as a homeowner.

You can play around with the information and test various scenarios by entering different amounts in the fields provided, such as your downpayment or interest rate. You can change the size of your downpayment and the payment frequency to see how it impacts your overall payment and total interest paid over the term of your mortgage

Key factors that can affect your mortgage payments (location, amount, fixed vs. variable)

There are several factors that can affect your mortgage payment, and most of these are within your control:

Credit ScoreScore Based out of 900 on credit repayment history.A minimum credit score between 680 and 720 is needed depending on the mortgage solution & lender. 
Subject Property LocationRural versus UrbanResidential mortgage rates apply only to residentially zoned properties
Purchase Price or ValuationA higher borrowed amount would mean a higher mortgage paymentA higher downpayment will make the mortgage easier to qualify as a percentage of your income.
Loan AmountA minimum downpayment of 5% is needed on the first $500K purchase price/valuation and 10% on anything over $500K.  A 20% downpayment is needed on the full amount if the purchase price/valuation is over $1M.The loan amount should first be net of any down payment before applicable default insurance is added to this amount.
Down paymentA higher down payment means lower mortgage payments.Fixed (fixed payment and rate) Variable (fixed payment and fluctuating rate) or Adjustable (payment adjusts with fluctuating rate)
Interest RateHigher rates will mean a larger mortgage payment.The interest rate will change based on your mortgage amount as the ratio of your purchase price/home valuation. (LTV)
Interest TypeThe interest type does not affect your qualification amount.  
Variable and Adjustable interest types are holding the discount from the prime rate, but this interest rate could change if the lender’s prime rate changes.
The LTV ratio is used to determine the interest rate and default insurance, if applicable, to be paid by the client. 
Loan-to-Value (LTV)A higher loan-to-value (LTV) ratio means a higher mortgage paymentThe LTV ratio is used to determine the interest rate and default insurance, if applicable to be paid by the client. 
Factors affecting your mortgage rate.

How to lower your mortgage payment

We have a few options available to reduce your mortgage payments.  There can be many reasons you choose to do this, including financial difficulty, renewing your mortgage, lowering your monthly household expenses to reduce your cash flow, or simply increasing other expenses (such as increasing your savings or increased contributions to your long-term investments, which can be a good way to reduce your overall risk). Use nesto’s Mortgage Payment Calculator to see what your payment would be in different scenarios as you consider the following:

Extending your current mortgage termIf you have extra space and could rent out part of your home and use the money to increase your cash flow. Be mindful to review your mortgage agreement to find out what is allowable with your lender, especially if your mortgage is default-insured.
Making a large prepayment in the term Lenders will let you re-amortize your mortgage back to the original chronological remaining amortization after the prepayment is made.
Finding a lower mortgage rate Depending on your penalty you could renew early with another lender and up to $3000 in fees to your mortgage balance without affecting the mortgage.

Lenders may let you early renew to a lower remaining term without a penalty.
Renting out part of your homeIf you have extra space and could rent out part of your home and use the money to increase your cash flow. Be mindful to review your mortgage agreement to find out what is allowable with your lender, especially if your mortgage is default insured.
Refinancing your mortgage at a lower interest rateDepending on your penalty, you could renew early with another lender and up to $3000 in fees to your mortgage balance without affecting the mortgage.

Lenders may let you early renew to a lower remaining term without a penalty.
Downsizing to a smaller and less expensive homeIf you don’t need the space, having a smaller home can reduce your mortgage costs or avoid a mortgage altogether if you sell the current home for a lot more than you need. You may have equity left over after the sale to top up your investments or savings. As well, a smaller home may have less property taxes and heating costs.
Options available to lower your mortgage payment.

Ways to pay off your mortgage faster

While not always feasible or in your best interest, depending on your financial situation, there are some steps you can take to help pay off your mortgage faster. These steps can save you thousands of dollars in interest and reduce the time you spend on mortgage debt.

Prepayment privileges enable you to make extra payments directly to pay off your principal. Prepayment options come in many forms and have different limitations based on your lender, but overall if you choose to exercise them, they will save you time and money so you can become mortgage-free faster.

There are several ways you can take advantage of prepayments, including:

Lump sum payments – This option will come either in the form of one single lump sum up to 10%, 15%, or 20% either once in a year or once a year on the anniversary date of the mortgage; or very liberally you can make multiple lump sum payments throughout the year without exceeding the allowable amount.

Double Up Payments – This option lets you automate the lump sum payments to double up and match your regularly scheduled payments. The savings will be exponential if you’re already on an accelerated payment plan.
Increase regular payments – If you have any prepayment privileges with your mortgage, you will have a corresponding option for lump sum payments that will let you increase your regular payments by the same percentage on the anniversary date.

Payment frequency – This option lets you accelerate your weekly or biweekly payment. This means for biweekly accelerated payments, the semi-monthly payment amount is applied 26 times a year, whereas weekly accelerated payments are just half of the semi-monthly applied 52 times a year. Although technically not considered a prepayment privilege, accelerated payments can shave off a couple of years of interest over the life of the mortgage.

On the reverse side, here are a few reasons to avoid prepayment as they may cause you hindrances later on with your mortgage renewal or financial planning:
All your savings get trapped in your home, and if you need to use that equity in the future, it could cost you more if the prevailing interest rates are higher than currently on the mortgage balance that is being paid off.

On the reverse side, here are a few reasons to avoid prepayment as they may cause you hindrances later on with your mortgage renewal or financial planning:
All your savings get trapped in your home, and if you need to use that equity in the future, it could cost you more if the prevailing interest rates are higher than currently on the mortgage balance that is being paid off.

Your money is less diversified if only invested in one home – this poses market, location and liquidity risks.

Many lenders with really low rates have minimum remaining amortization requirements as their return on investment to the loaned money reduces significantly at the half-life of your mortgage.

Your mortgage and home valuation are exchanged in Canadian dollars. In contrast, your long-term purchasing power depends on prevailing foreign exchange rates, as food and goods must be imported in foreign currency. This means that if you solely depend on the value of your home for retirement savings, you could be in for a shock in the future on the purchasing power of the Canadian dollar.

Diversifying your investment portfolio to include a mix of securities such as stocks, bonds, and mutual funds will reduce your overall longer-term risk versus depending solely on the valuation of your home. Diversified investments will reduce your risk against many risk classes.

Frequently Asked Questions (FAQ) on Mortgage Payments

How is a monthly mortgage payment calculated?

Mortgage payments are typically made up of 2 parts: the principal and the interest. The principal is the money you borrowed to purchase your home, while the interest is the loan carrying costs charged by the lender for lending you the money. 

Your monthly mortgage payment is simply the sum of these 2 amounts divided by the number of months in your loan term, such as 5 years, whereas your interest is amortized over the life of your mortgage.

The mortgage payment is used to pay the interest first and then the principal. As the mortgage life progresses, the amount going to the principal keeps increasing, and the interest portion keeps reducing until all the principal is paid off. The portion of your ownership of your home, which is made up of the principal that is paid off and an increase in the value of your home, is called your equity in the property.

What is CMHC insurance?

CMHC stands for Canada Mortgage and Housing Corporation — a crown corporation that default insures most of Canada’s prime mortgages. There are 2 other mortgage default insurance providers though they are privately owned: Sagen and Canada Guaranty. 

Mortgage Default Insurance protects the lender in case the borrower defaults – unable to pay their mortgage. The cost of default insurance ranges between 2.8% to 4% of the mortgaged amount. This cost can be paid in cash or added to your mortgage balance – upon qualification, as the total mortgage you can carry still needs to meet certain criteria.

An insured mortgage is qualified as such when your downpayment is less than 20%. Therefore, you will need to purchase default (high ratio) insurance. Although this insurance is added to your mortgage, the taxes (PST) on purchasing this insurance are not. 

Your solicitor will collect and remit the PST on behalf of the high ratio insurer (CMHC, Sagen or Canada Guaranty) upon your closing. Once the high ratio insurance is purchased from one of the three default insurers, the risk to the lender is reduced as the default insurance will protect them in case of default.

What is an amortization schedule?

Amortization is the life of the mortgage – the time to fully pay off the principal and interest on the borrowed amount. Amortizations used to be up to 40 years, but over time, they have been reduced to 25 or 30 years. The amortization schedule is the expected ongoing reduction of the mortgage balance, breaking down principal and interest portions with each payment you make until no remaining principal is owed. 

The amortization schedule helps you to conceptualize progress as you work towards becoming mortgage-free. With the amortization schedule, you’ll be able to see what portion of each payment is going toward your principal and interest and the total paid toward each component at any point during the mortgage amortization period.

Why Choose a 5% Downpayment?

A 5% downpayment is the lowest amount needed to obtain a mortgage in Canada on a property valued up to $500,000. A 5% downpayment can be an excellent option for first-time homebuyers (FTHB) looking to become homeowners. The lowest downpayment comes with the lowest mortgage rates.

Why Choose a 10% Downpayment?

A 10% downpayment is an excellent choice to reduce your total mortgage amount while still having access to the best rates reserved for insured mortgages.

Why Choose a 15% Downpayment?

A 15% downpayment enables your mortgage to access the lowest rates with insured mortgages. The default (high-ratio) insurance premium is the lowest, with a 15% to 19.99% downpayment. Technically, a homebuyer could save themselves thousands of dollars by putting in the highest possible downpayment and paying the default insurance premium in cash, preventing it from being added to their mortgage balance.

Why Choose a 20% Downpayment?

A 20% downpayment is the minimum requirement if you’re purchasing a property priced at $1 million or more, buying an investment property, or taking a 30-year amortization for your mortgage. This option and a 25-year amortization will help you avoid mortgage default insurance premiums while accessing lower insurable rates. This option reduces the qualifying mortgage amount even further. Although a 30-year amortization will come with higher rates, it will, in effect, lower your mortgage payment. However, the longer your amortization, the more interest you’ll pay over the life of your mortgage.

Why Choose a Downpayment Greater than 20%?

A downpayment greater than 20% can be a great option if you want a higher purchase amount and are making up the difference with a larger downpayment. If you choose a 25-year amortization, you could access better rates than a 30-year amortization.

Why Choose a Downpayment Greater than 35%?

A downpayment greater than 34.99% can be a great option if you want a higher purchase amount and make up the difference with a larger downpayment.

With a property value of less than $1 million, while choosing a 25-year amortization and putting down at least 35%, you could access the second lowest mortgage rates in the market after insured rates, which are always the lowest as they are default-insured with little to no risk for the lender.

If you choose an amortization greater than 25 years, purchase a home valued at $1 million or more, or buy an investment property, you can only access the highest uninsured rates regardless of the downpayment greater than 20%, 25%, 30% or 35%.

What is a High-Ratio Mortgage?

A high-ratio mortgage is another name for a default-insured mortgage where the borrower provides a downpayment below 20%

What is a Conventional Mortgage?

A conventional mortgage is a standard charge mortgage where the homebuyer provides a downpayment of 20% or greater.

What is a Collateral Mortgage?

A collateral mortgage has the charge registered against the property. The property is used as collateral against the mortgage. The borrower must provide a 20% or greater downpayment and could benefit from re-advancing any paid-off principal balance over the life of the mortgage. The collateral charge allows the borrower to take advantage of the equity that builds up as they pay down their mortgage principal. This will enable them to set up a secondary mortgage, secured line of credit or home equity line of credit (HELOC) as additional products under the same collateral charge.

How nesto works

At nesto, all of our commission-free mortgage experts hold concurrent professional designations from one or more provinces. Our clients will receive the best advice and care when they speak with experts exceeding the industry status quo.

Unlike the industry norm, our agents are not commissioned but salaried employees. Our honest and transparent advice guarantees free, unbiased advice on the most suitable mortgage solution for your unique needs.  Our advisors are measured on the satisfaction and quality of advice they provide to their clients.

nesto is working hard to change how the mortgage industry functions. We start with honest and transparent advice, followed by our best rates upfront.  We can offer you these best rates by using technology by providing a virtual and 100% online process to reduce our overhead costs.

By working remotely across Canada, all our mortgage experts and staff spend less time commuting to work and more time with their friends and family. This makes for more dedicated employees and contributes to our success with happy and satisfied clients.

nesto is on a mission to offer a positive, empowering and transparent property financing experience, simplified from start to finish.

Reach out to our licensed and knowledgeable mortgage experts to find your best mortgage rate in Canada.

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