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Mortgage Payment Calculator

As a homebuyer, many valuable resources are available to help you make informed decisions throughout the home-buying 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 the Mortgage Payment Calculator. This enables you to calculate your estimated monthly mortgage payment alongside a corresponding amortization schedule.

Calculating mortgage payments is no longer a difficult task, thanks to nesto. This is vital information that should be contemplated before you even start home shopping so that you understand what you can comfortably afford.

Our Mortgage Payment Calculator allows you to input variables such as the home’s purchase price, your anticipated down payment, the interest rate and amortization period, and payment frequency. You can also play around with these variables to see how specific changes will impact your monthly mortgage payment amount.

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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 down payment 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% down payment), 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 down payment of 20% or more for a conventional mortgage.

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 down payment (or equity in the home) and applicable default insurance if purchased with less than 20% down payment.

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 down payment or interest rate. You can change the size of your down payment 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:

FACTOR	MEASUREMENT	REQUIREMENT TO QUALIFY
Credit Score	Score Based out of 900 on credit repayment history.	Minimum credit score of 680 or 720 needed depending on the mortgage solution & lender.
Subject Property Location	Rural versus Urban	Residential mortgage rates apply only to residentially zoned properties
Purchase Price or Valuation	Higher purchase price requires higher down payment	Minimum down payment of 5% needed on first $500K purchase price/valuation and 10% on anything over $500K. 20% down payment needed on full amount if purchase price / valuation over $1M.
Loan Amount	Higher borrowed amount would mean a higher mortgage payment	The loan amount should first be net of any down payment before applicable default insurance is added to this amount.
Down payment	A higher down payment means lower mortgage payments.	Higher down payment will make the mortgage easier to qualify as a percentage of your income.
Interest Rate	Higher rates will mean a larger mortgage payment.	The interest rate will change based on your mortgage amount as ratio of your purchase price / home valuation. (LTV)
Interest Type	Fixed (fixed payment and rate) or Variable (fixed payment and fluctuating rate) or Adjustable (payment adjusts with fluctuating rate)	The 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.
Loan-to-Value (LTV)	Higher loan-to-value (LTV) ratio mean a higher mortgage payment	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:

SCENARIO	IMPACT
Extending your current mortgage term	Lenders will let you renew your mortgage early in the middle of your term without a penalty.
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 home	If 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 rate	Though not always the case, sometimes refinancing to extend your mortgage amortization on a lower rate can significantly decrease your mortgage payments.
Downsizing to a smaller and less expensive home	If 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.

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)

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 down payment 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.

How nesto works

At nesto, our commission-free mortgage experts hold professional designations from one or more provinces concurrently. We believe that our clients will receive the best advice and care when they speak with specialists that exceed the industry status quo.

Unlike the industry norm, our agents are not commissioned but salaried employees. This means you’ll get 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’s 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 advisors 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.