Mortgage Payment Calculator
Are you thinking about buying a home? When taking out a loan, especially a mortgage, you need to prepare well. There are several aspects you should consider: the down payment, the amortization schedule, the interest rates, and suchlike.
You usually get all the necessary information at your first meeting with a lender. But why not get ready for it? Using an online mortgage calculator enables you to check out your options before you talk to your lender. Hence, you know what you can expect them to offer.
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What’s a Mortgage Calculator?A mortgage is a type of loan typically used for buying a home. It’s a secured loan because the home you want to purchase is used as collateral. A lender has the right to claim the collateral in case you fail to pay off your debt. But when you make your last payment, the home is entirely yours. An online mortgage calculator is a handy tool that can help you prepare for your first meeting with a lender. It’s good to know your options, and from there, you can even negotiate better conditions. With a mortgage calculator, you can go through those options in just a few clicks. You can modify the variables to see what scenario works best for you.
How to Use a Mortgage CalculatorTo use a mortgage calculator, you need to know the following details:
- The price of the real estate you’re planning to buy.
- The amount of money you can afford as a down payment (or the amount your lender requires).
- You need $10,000 for a down payment.
- You need $7,600 as mortgage default insurance (also called the CMHC insurance – lenders use it to protect themselves in case they default on the mortgage).
- Your total mortgage amount will be $197,600 (it’s the price of your desired home, plus the CMHC insurance, less the down payment).
- Your monthly payment is likely to be $1,118 at a 3.24% rate.
- Your land transfer tax is likely to be $3,450 (Are you a first-time homebuyer? In Canada, you get the land transfer tax money back if it’s the first time you’re buying a home – make sure you take this into account when using a calculator).
Can I Lower My Mortgage Payment?Your monthly payments depend on your income, credit score, and other factors that your lender considers. There are ways to lower your monthly payments if you believe they’re too high for your current budget. When taking out a loan, you can see your amortization schedule. This schedule shows all your monthly payments during the whole amortization period. You can see the portion of the principal and the interest for each monthly payment and know precisely how much you’re paying for what. Your mortgage payment can be lower if:
- You increase the down payment. The higher this sum is, the less money you need to borrow from the lender. Your overall interest will also decrease, and your monthly payments may fit better into your budget.
- You find a better interest rate. Note that the APR and monthly interest rate aren’t the same. The APR (Annual Percentage Rate) includes some other loan costs, such as the origination fee, broker fee, closing costs, or prepayment fee.
- You choose a variable interest rate. However, this option carries certain risks. While it’s true that the interest can drop and make your monthly payments lower, it can also suddenly increase and make it impossible for you to keep up with paying off the debt.
- You prolong the amortization period. This is logical: if you choose to pay off the debt over the next 30 years instead of 20, your monthly payments will be lower. However, keep an eye on the interest here, as your overall mortgage cost may become higher.
- You refinance your mortgage. Borrowers with good credit scores can refinance their mortgages at lower rates and save lots of money this way.
- Drop the mortgage insurance. It’s mandatory when your down payment is less than 20% of the real estate value. Still, as soon as you repay that percentage of your debt, you can ask the lender to quit the insurance. This payment is just an additional cost when you don’t have enough money to make a larger down payment.