By Sandra MacGregor and Justin Dallaire on July 24, 2024
Estimated reading time: 7 minutes

Mortgage payment calculator

By Sandra MacGregor and Justin Dallaire on July 24, 2024
Estimated reading time: 7 minutes

Use a mortgage payment calculator to understand what a mortgage will cost you in real terms.

For the majority of Canadians, buying a home will be the single biggest purchase they ever make, and getting a mortgage is an essential part of this process. According to a National Bank of Canada report, the majority of variable-rate-fixed-payment mortgage borrowers who signed onto between 2020 and 2022 have hit their trigger rates this year. What is a trigger rate? That’s when the interest rate hits a level when the entire mortgage payment goes toward interest, and not paying down the mortgage. But how do you ensure you get a mortgage that you can actually afford over the long term? That’s where a mortgage payment calculator comes in.

Why use a mortgage payment calculator?

Just how much a home mortgage will end up costing you over the long haul can be hard to fully grasp, especially when you factor in interest. A mortgage payment calculator is an indispensable tool that will help you understand what your payments will be over time. It also gives you a more accurate sense of what you can afford.

By using a mortgage calculator to estimate your payments, you’ll have a more realistic picture of the options available to you—and you’ll be better placed to assess mortgage products. In short, a mortgage payment calculator can help you see how a mortgage fits within your current financial plans, as well as how it may affect your future goals.

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How are mortgage payments calculated?

By plugging a few key numbers into a mortgage payment calculator, you’ll get a reliable estimate of your regular payment amount. Here are the most important variables that determine your mortgage payments:

Down payment amount: The size of your down payment and the purchase price of your home will determine the amount of money you need to borrow for your mortgage. (Note: You’ll need to have the minimum down payment required in Canada, which is tied to the value of the home.) Your mortgage amount is calculated by subtracting the down payment from the purchase price. If your down payment represents less than 20% of the purchase price, you will have to add the cost of mortgage default insurance. Our calculator does this for you—simply enter the purchase price of the home and the size of your down payment.
Amortization period: The number of years it will take you to repay the mortgage in full. The amortization should not be confused with the mortgage term, which is the period of time your mortgage contract is in effect. Buyers typically complete several terms before paying off the loan. Borrowers with less than a 20% down payment must have mortgages amortized over 25 years or less. Those with more than 20% also have access to 30-year mortgages.
Interest rate: The rate of interest you’ll pay on any outstanding mortgage balance. Your rate will depend on trends in the economy and the terms of your mortgage, such as whether you decide to go with a fixed-rate mortgage or variable-rate mortgage, among other factors.
Payment frequency: The interval at which you make your mortgage payments. The calculator above allows you to select monthly, bi-weekly or accelerated bi-weekly payments; however, borrowers can sometimes also pick from semi-monthly, weekly and accelerated weekly payment options. The frequency of your payments will influence how many payments you make per year and the size of each payment. It also impacts how much interest you will pay over the life of the loan. The more frequent your payments, the faster you’ll pay down the debt.

To calculate your mortgage payments, enter these details into the mortgage payment calculator. (The calculator will automatically display the best rates available in your region, but you can also enter your own rate.) The calculator then shows monthly payments across four different scenarios, based on the information you provided. You can alter any of the variables to view how your regular mortgage payment would be affected.

If your down payment represents less than 20% of the purchase price, the cost of mortgage default insurance is automatically calculated and incorporated into your regular mortgage payment.

How to manually calculate your mortgage payments

Before we calculate how much your monthly mortgage payments will be, we have to figure out three key pieces of information first. Then you’ll plug them into the mortgage payment formula below. This formula calculates your monthly mortgage payment.

Can you afford a mortgage?

Each month, we feature a report about mortgage affordability in Canada. Here’s an excerpt.

The June data reveals that buyers needed less income to qualify for a mortgage in six of 13 markets studied. This reflects a small decline in the average five-year mortgage rate, from 5.49% to 5.47%, and an accompanying mortgage stress test of 7.47%. Mortgage rates lowered somewhat over the course of the month. Variable mortgage holders saw their monthly payments fluctuate due to the Bank of Canada (BoC) rate cut on June 5th, while some lenders discounted their fixed mortgage rates in response to lower bond yields.

The average national home price also softened slightly in June. The Canadian Real Estate Association (CREA) suggests that it came in -1.6% on a year-over-year basis to $696,179. This was largely due to the built-up glut of inventory (available listings rose 26% annually), which well offset the modest sales uptick between May and June. These price declines were notable in Canada’s most expensive markets, which led the way in terms of improved affordability.

Read the full article: How much mortgage do I need to qualify for a mortgage in Canada?

What you’ll need to calculate your mortgage payments

The three pieces of info you’ll need to know are:

1. The mortgage principal

Your mortgage principal refers to the total amount borrowed, and wen you make your regular mortgage payments, part of the money goes towards the principal and part of it goes towards paying interest on the loan. To calculate a mortgage principal, subtract the down payment from the total purchase price of the home. Here’s an example of calculating the mortgage principal for a $600,000 home with a down payment of $120,000.

Mortgage principal = purchase price – down payment
Mortgage principal = $600,000 – $120,000
Mortgage principal = $480,000

2. The monthly interest rate on your mortgage

Lenders tend to use annual interest rates in their mortgage contracts. This means you’ll have to divide the quoted rate by 12 to determine your monthly interest rate, before inputting it into the mortgage payment formula.

Here’s an example of a 5.38% mortgage rate. Note: To make life easy (and the numbers less cumbersome), we’ve rounded to five decimals.

Monthly interest rate = annual interest (%) / 100 / 12 months
Monthly interest rate = 5.38 / 100 / 12
Monthly interest rate = 0.00448

3. The number of payment periods

This is the total number of mortgage payments it will take to pay off the mortgage in its entirety, based on the amortization period. In Canada, lenders typically offer amortization periods of five to 25 years. (Your mortgage term is different. It’s the duration of your mortgage contract.)

Here’s an example of a 25-year mortgage.

Payment periods = number of years x 12 months
Payment periods = 25 x 12
Payment periods = 300

Using the mortgage payment formula to manually calculate your mortgage payments

Now, with your mortgage principal, your monthly interest rate and your number of payment periods in hand, complete the below formula. For simplicity, we’ve attributed a symbol for each of the three inputs used in the formula.

P = Mortgage principal
I = Monthly interest rate
N = Number of payment periods

Here are some more tips:

Calculate the parentheses first (don’t forget the rules of PEMDAS from school: parenthesis, exponents, multiplication, division, addition, then subtraction), starting with the parentheses within the parentheses.
Calculate the exponents (^). An exponent represents a series of multiplications. For example: 2^2 = 2 x 2 = 4 and 2^3 = 2 x 2 x 2 = 8.
Calculate the remaining multiplications and divisions.

And here is the monthly payment formula.

Monthly payment = P x (I x (1+ I)^N ) / ((1 + I)^N – 1)

What is the average mortgage payment in Canada?

According to the article “How much is the average mortgage payment in Canada?”, the average monthly payment on new mortgages in Canada is $1,984. In 2019, it was $1,415.

How to lower your mortgage payments

If you’re not comfortable with the mortgage payment estimates you’re getting, keep in mind there are ways you can lower them. For example, you can look for a house with a lower purchase price or make a larger down payment (both will reduce the size of your mortgage). You can opt for a longer amortization, although that will cost you more in interest over time. You can also shop around for a lower mortgage rate or work with a mortgage broker who has access to many lenders.

Mortgage Payment Calculator Notes

In using the above calculator, know that mortgage rates are based on the criteria you provide. It is possible a lender will offer a different rate than shown here when you actually apply for a mortgage. Rates can also vary based on an applicant’s credit history. Additional terms and conditions can apply. A true mortgage will have specific qualification criteria, including debt servicing ratios, credit, property value, and other details. Results shown here only serve as examples, and do not take into consideration homeowners insurance or property taxes. The shown default rates are based on the following assumptions: an excellent credit history, the purchase of a single family home (under CAD$1,000,000) for personal occupancy, and a down payment of 20%.

More on mortgage calculators:

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About Sandra MacGregor

Sandra MacGregor has been writing about personal finance, mortgages, investing and credit cards for over a decade.

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About Justin Dallaire

Justin Dallaire is the senior editor at MoneySense.ca. He was previously an editor at Strategy magazine and has a master’s degree in journalism from Toronto Metropolitan University.

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