# How to Calculate Different Types of Mortgage Payments

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| Feb 3, 2023
Reviewed, Jun 5, 2023
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Mortgages are one of the biggest financial investments Canadians make, and it’s essential to understand how the different components of a mortgage impact the monthly mortgage payments. Using a mortgage calculator in Canada can help you understand what you can afford and make informed decisions when buying a home. We’ll walk you through the process of how to calculate different types of mortgage payments, including the impact of factors such as the down payment, amortization period, payment frequency, mortgage rate, and term length.

### Key Highlights

• Using a mortgage payment calculator is an effective way to determine your monthly payments and amortization schedule.
• With most online mortgage calculators (including our own!) all you’ll need to do is input the most important information such as the asking price of your home, the percentage of your down payment, and the amortization period of your loan.
• Before you even begin looking for a home, you should think about this important information so that you can determine what you can comfortably afford.

## How to Use a Mortgage Payment Calculator

A mortgage payment calculator is a useful tool that can help you estimate your monthly mortgage payments. Simply enter the loan amount, interest rate, and amortization period, and the calculator will provide you with an estimated monthly payment amount.

## Understanding Mortgage Calculator Components

Before using a mortgage payment calculator in Canada, it’s essential to understand the components that make up your monthly mortgage payment.

These components include the loan amount, interest rate, amortization period, payment frequency, and mortgage term.

### Home Price

First things first, you should definitely know the price of your potential home before embarking on calculating your mortgage. Typically, you should include the total asking price of the home before additional fees.

### Down Payment

All mortgage applications require a down payment of 5% minimum. Depending on how long you want to make monthly payments and your budget constraints, you can put down more 10%, 15%, or even 20% of the cost of a new home. In Canada, down payments of less than 20% will require CHMC insurance included your mortgage payments.

### Amortization Period

In the case of a mortgage, the amortization period refers to the number of years it will take to pay off the entire mortgage loan. During this period, the borrower makes regular payments, with a portion going towards paying off the interest and a portion going towards reducing the principal balance. The typical amortization period for a mortgage in Canada is 20 to 30 years. You’ll need to know how long you want to pay off your loan before making an accurate calculation.

### Payment Frequency

Often, you’ll go with either bi-weekly or monthly payments. Keep in mind that more frequent payments will result in more money going towards your mortgage payments so be sure to consider your budget.

### Mortgage Rate

The mortgage rate all depends on your lender. The current Bank of Canada rate is 4.50% but many lenders will be slightly above that. You can find the best mortgage rate in Canada using our expert advice here at nesto.

### Mortgage Term

The mortgage term plays a key role in determining the overall cost of a loan, as the length of the term affects the total amount of interest paid over the life of the loan. A shorter mortgage term generally results in a lower interest cost, while a longer term will result in a higher interest cost but lower monthly payments.

### Amortization Schedule

An amortization schedule is a table or chart that outlines the payments made on a loan over time. It shows the breakdown of each payment into the amount that goes towards paying off the loan’s principal and the amount that covers the interest. Amortization schedules are often used to help borrowers understand the details of their loan, including how much they need to pay each month, how much they will pay in interest over the life of the loan, and when they will be able to pay off the loan in full.

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## How to Calculate Your Down Payment with a Mortgage Calculator in Canada

Accurately calculating your down payment is an important factor in determining your monthly mortgage payments and the amount of interest you’ll pay over the life of the loan. When using a mortgage payment calculator, you can adjust the down payment amount to see how it impacts your monthly payment.

Our mortgage calculator at nesto considers the following factors: the asking price of the home, the down payment amount, the down payment percentage, the amortization period, and the payment frequency.

If, for instance, the asking price is \$400,000 with a 15% down payment (\$60,000) at a 20-year amortization period with a monthly payment frequency, you’ll pay \$2,202 per month. There will also be the CMHC mortgage insurance cost of \$9,520 over the term of the mortgage.

A standard amortization period is typically 20 to 30 years, depending on your budget. When using a mortgage payment calculator in Canada, you can adjust the amortization period to see how it impacts your payments.

Adjusting the amortization period will have a significant impact on your monthly payments and the total amount of interest you pay over the life of the loan. It’s important to consider your budget and financial goals when making this decision.

When calculating your mortgage online, it’s important to adjust your payment frequency to see how it impacts your overall budget. Typically, you’ll go with either bi-weekly payments or monthly payments.

Making more frequent payments can reduce the amount of interest you pay over the life of the loan, as each payment reduces the principal balance. For example, making bi-weekly payments instead of monthly payments can reduce the amount of interest you pay by thousands of dollars over the life of the loan. Keep in mind that choosing more frequent payments means that you’ll be making larger payments more often, which could impact your budget.

The mortgage rate is a crucial component of your monthly mortgage payment. You can easily adjust the mortgage rate on a mortgage payment calculator.

For example, if you take out a \$300,000 mortgage with a 4% interest rate over 25 years, your monthly payment would be around \$1,393. However, if your interest rate were to increase to 5%, your monthly payment would be around \$1,515, an increase of nearly \$122 per month.

The mortgage term sets the repayment schedule and the conditions under which the loan must be repaid. A standard mortgage term is typically five or ten years depending on your arrangement. It’s recommended to adjust the mortgage term to see how it impacts your payments.

Say for example that a borrower who takes out a mortgage with a 5-year term makes larger monthly payments compared to a borrower who takes out a mortgage with a 25-year term. The borrower with the 5-year term will pay less in interest over the life of the loan compared to the borrower with the 25-year term.

## Final Thoughts

Using a mortgage payment calculator in Canada is a great tool to help you determine your monthly payments and amortization schedule. With most online mortgage calculators, all you need to do is input the most important information such as the asking price of your home, the percentage of your down payment, and the amortization period of your loan. Before you even begin looking for a home, you should think about this important information so that you can determine what you can comfortably afford. Use one of our mortgage payment calculators today so that you can be one step closer to finding your dream home!