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Mortgage Calculator, Explained...



This blog is here to help you navigate the “Mortgage Calculator” tool on our website. The sole purpose of this tool is to help you determine how different options on your mortgage, impact your mortgage payment. 


When choosing the right mortgage options, you will be faced with questions like: 

  1. What term should you enter? 

  2. What rate is most favourable? 

  3. What is the maximum amortization for this mortgage? 

  4. What type of rate should I opt for? Fixed or Variable? 

  5. How frequent should I pay my mortgage? Monthly, bi-weekly, semi-monthly? Etc. 


All of these decisions impact your Mortgage Payment. 


Let’s Get Started: 


Step 1: Mortgage Amount: Have a property in mind? Use the toggle to adjust the Mortgage Amount for your property of interest. Keep in mind, this is the amount BORROWED from the lender (the mortgage amount), not the asking price for the home. (Cost of Property - Down Payment)


Step 2: Choose the Payment frequency in which you would like to pay your regulator mortgage payment. A lot of people try to line this up with their pay schedules, for instance, if you get paid bi-weekly, your mortgage payment could also come out bi-weekly. If you are  more savings conscious, you may decide to choose your payment frequency based on interest savings over the amortization of your mortgage. Typically, the more frequent you pay your mortgage, the less interest you will pay over the entirety of your mortgage, as more of the principal is paid down faster, therefor less paid on compound interest. 


Step 3: Inputting your Rate (%) will be completely dependant on two things: 


  1. Your type of rate and 

  2. The term. 


To explain this further…


  1. Fixed Rate VS. Variable Rate: While all rates can change at any moment, a Fixed Rate typically offers more “stability” for the term of your mortgage. By choosing a fixed rate, you will lock in that rate for the entire term of the mortgage. For example: A 5 year term at 5.25%, means that you will be guaranteed the 5.25% rate for 5 years and at when you hit the 5 year mark, you will re-negotiate your rate, based on current market rate (also know as your Renewal Period). A Variable Rate, as the same suggests, is more variable. If you lock in for a certain term for a variable rate, it is subject to change with the market. A variable rate is a function of prime; which means it will be Prime + “a certain rate”. This “certain rate” is what is guaranteed by your lending institution, and the Prime Rate is what fluctuates with the Canadian market. For example: Prime Rate in Canada currently is 6.95%, this can change at any given time, even if you are locked in to a 5 year term. When you sign your mortgage, you will sign for Prime (6.95% + or - “a certain rate”). The “certain rate” is what is guaranteed during your term that you lock in for - this part will stay constant.

  2. A Mortgage Term refers to the amount of time that you lock your rate in for. When choosing your best term option, some people are hyper focused on the rate itself, that is linked to the term, but another key factor to consider is how will the property of interest serve you? Is this a property you plan on flipping or one that you plan to reside in for years to come? Not only is considering rate prices important, but by understanding the term length needed for the subject property could help you avoid mortgage pre-payment penalties down the line. 


Step 4: Amortization: A typical amortization in Canada in 25 years. The maximum amount of years that you can stretch your down payment out to is 25 years, with a down payment that is less than 25 years. If you have 20% or more as a down payment, you can stretch your amortization out to 30 years, maximum. In short, the longer the amortization, the smaller your regular mortgage payment will be. But keep in mind, where it will free up some cash flow month to month for you, you will end up payment more interest over the amortization of your mortgage. There is a trade off here and only you can decide what makes more sense for yourself - Do you value increased cash flow for the present, or do you want to save money on interest over the next 25-30 years?


Once all of the above 4 steps are filled out, you will see at the top of your page what your mortgage payment will look like! Play around, run different scenarios and see how each input impacts your mortgage payment. 


Like any online calculator, the information is only as accurate as the information you put in to it. This blog will walk you step by step through the calculator, however, tailored advice regarding your individual financial situation is always advised, so feel free to reach out to anyone on our team at anytime for guidance. 


We are here to help! 

Call us at 902-608-6008 or book online for an appointment. 

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