How much will your mortgage cost you every month? Can you save money by switching lenders? Mortgage calculators can answer these questions and more.
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Owning a home can be a powerful wealth-building tool, but it can also be expensive when you account for mortgage payments, property taxes, insurance premiums, utilities and maintenance.
To get a clear picture of how a home purchase impacts your finances, you’ll need to determine how much you can afford on a mortgage and how much you can spend in total on a home, as well as how these factors affect your overall housing costs. Fortunately, mortgage calculators let you model this information, helping you make sound financial decisions about what will likely be the most important purchase of your life.
You wouldn’t buy a car without knowing what it would cost you on a monthly basis, and you shouldn’t buy a home without an accurate idea of how it will impact your finances, either.
The vast majority of home buyers don’t have enough money on hand to cover the cost of purchase. These buyers must take out a loan, called a mortgage, to cover the remaining balance. Typically, the money must be paid back over a period of five to 25 years, so picking the right mortgage product is crucial.
Even if you’re comfortable with your choice, you will (and should) ask yourself questions as time passes and your financial situation changes: Could I get a more competitive mortgage rate? Should I absorb the financial penalties that come with switching lenders? How much am I really paying to own a home?
Mortgage calculators can help answer all of these questions. Some calculators help reveal the true costs of homeownership, including the cost of property and land transfer taxes, home insurance and utilities. This information can help you build a budget and ensure your other financial priorities, like paying off debt and saving for your future, remain on track. If you’re not sure if homeownership is for you, a renting versus buying calculator is a good place to start.
Finally, one advantage of mortgage calculators is that they allow to you model different scenarios based on different purchase prices, down payment amounts, amortization periods, and so on. Playing with these variables will identify opportunities for you to save money on your home, even before you contact a lender or mortgage broker. If nothing else, you will have learned a great deal about how mortgage costs are calculated.
Not all mortgage calculators are the same. Good ones will help you understand the true costs of owning a home—such as how much you can expect to spend on property taxes and utilities—so that you can plan accordingly. Here are the common types of calculators, along with a brief explanation of how they can help you plan your home purchase or make the right decision about your current mortgage.
A mortgage affordability calculator determines the size of the mortgage you can afford to borrow, based on your annual household income, debts and living expenses. In mortgage affordability calculations, your living expenses are those you would incur by living in the home you want to buy, including the mortgage payments, property taxes and heating costs.
These calculations don’t factor in all of your living expenses, such as the costs of daycare, commuting to work and putting food on the table. To truly understand what you can afford on a mortgage, consider making a budget that includes all your expenses.
See the MoneySense mortgage affordability calculator.
Watch: What is mortgage affordability?
One of the most useful tools in the mortgage decision-making toolbox, a mortgage payment calculator estimates your regular mortgage payments, based on the purchase price of the home, the size of your down payment, and the interest rate and amortization of the loan.
Some housing expenses—such as property taxes, land transfer taxes and whether or not you need mortgage default insurance—are contingent on the size of your mortgage and the value of your home. A good mortgage payment calculator will give you a quick rundown of what you can expect to pay, accounting for all these factors. It can even show you how much interest you’ll pay over the life of the mortgage, based on the interest rate, amortization and mortgage payment frequency you’ve selected. Tinker with these variables to discover ways to save money.
See the MoneySense mortgage payment calculator.
When taking possession of a property, you must pay a fee to the province or territory (and sometimes the municipality). The amount you pay is often calculated as a percentage of the property value. This fee is known as land transfer tax in all Canadian provinces, except Alberta and Saskatchewan, where it is referred to as a transfer fee. Certain Canadian municipalities, such as Toronto, levy additional land transfer taxes.
Considering these taxes are calculated differently across jurisdictions, you may find it difficult to keep track of how much you owe. Land transfer tax calculators make this process easy, no matter where you live in Canada, and many even show you if you’re eligible for rebates.
As required by the government of Canada, if you buy a home with less than a 20% down payment, you’ll have to pay mortgage default insurance. You may also need to obtain this type of insurance under other circumstances that make it riskier for a lender to provide you with a mortgage.
Not to be confused with home insurance—which covers damage and loss to a homeowner’s property—mortgage default insurance protects the lender against default (meaning you are unable to make your payments). This type of insurance is sometimes referred to as Canada Mortgage and Housing Corporation (CMHC) insurance, named after the country’s public mortgage insurance provider, although it can also be provided through Sagen and Canada Guaranty.
A mortgage insurance calculator tells you how much your premiums will be, based on your down payment and purchase price. Often, this information can also be found using a mortgage payment calculator, which should include the insurance premium as part of your regular mortgage payment.
See the MoneySense mortgage insurance calculator.
A mortgage refinance refers to a process through which the terms of a mortgage contract are renegotiated with the lender. When you refinance your mortgage, you are breaking your current contract (which often comes with paying a financial penalty) in order to obtain a new one, either with your current lender or a new one.
Different elements of a mortgage contract can be renegotiated at this time, including the interest rate on the mortgage, the mortgage balance (if you wish to borrow more money by accessing equity in your home) and the mortgage type (for example, switching from a closed to an open mortgage).
A mortgage refinance calculator can provide you with many different pieces of information. It will estimate the penalties you’ll pay to break your mortgage, calculate your new mortgage payment and ultimately help you determine if you can save money by refinancing.
In Canada, it’s common to repay a mortgage over several years (or even decades). In fact, 25 years is the most popular amortization period for Canadians. This means most borrowers will renew their mortgage contracts several times, at the end of their mortgage term, before paying the loan off in full.
When your mortgage term is close to its end date, you should receive an offer to renew it from your existing lender. Whether you choose to stick with your current provider or pick a new one, this is a great opportunity to crunch the numbers using a mortgage renewal calculator. This tool is essentially a simplified version of a mortgage payment calculator that shows you how the interest rate on your renewal offer will impact your monthly payments.
See the MoneySense mortgage renewal calculator.
While a mortgage calculator is an excellent starting point in your home buying journey, it won’t replace the expertise and experience of professionals, who are equipped to handle the nuances of your financial situation. When you’re ready to move forward with buying a home, it’s essential to consult a mortgage broker or financial planner. These professionals can point out any caveats or oversights in your planning process and suggest the best options for you.
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