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How to Calculate Your Mortgage Payment

Understanding your mortgage helps you make better decisions. Instead of just taking whatever you get, it pays to look at the numbers behind any loan – especially a big loan like a home loan.

To calculate a mortgage, you’ll need a few details about the loan. Then, you can do it all by hand or use free online calculators (or a spreadsheet) to crunch the numbers.

Most people only focus on the monthly payment, but there are other important details that you need to pay attention to.

We’ll start with calculating the payment, and we’ll also look at how much you pay in interest ​and how much you actually pay off – in other words, how much of your house you’ll actually own.

The Inputs

To calculate (and understand) the payments, gather the following information about a potential mortgage loan:

• The loan amount (or principal)
• The interest rate on the loan (not necessarily the APR, which also includes closing costs)
• The number of years you have to repay (also known as the term)
• The type of loan: fixed rate, interest only, etc.
• The market value of the home

Calculations for Different Loans

The calculation you use will depend on the type of loan you have. Most home loans are fixed-rate loans (for example, standard 30-year or 15-year mortgages).

For those loans, the formula is:

Loan Payment Amount / Discount Factor

You’ll use the following values:

• Number of Periodic Payments (n) Payments per year times number of years
• Periodic Interest Rate (i) Annual rate divided by number of payments per
• Discount Factor (D) <[(1 i) ^n] - 1>/ [i(1 i)^n]

Example: assume you borrow \$100,000 at 6% for 30 years to be repaid monthly. What is the monthly payment (P)?

• D 166.7916 ( <[(1 .005)^360] - 1>/ [.005(1 .005)^360])
• P A / D 100,000 / 166.7916 599.55

How Much Goes Towards Interest?

Your mortgage payment is important, but you’ll also want to know how much you lose to interest each month. A portion of each monthly payment is your interest cost, and the remainder goes towards paying down your loan (you might also have taxes and insurance included in your monthly payment).

An amortization table can show you – month-by-month – exactly what happens with each payment. You can create an amortization table by hand, or use a free calculator or spreadsheet to do the job for you. Take a look at how much total interest you pay over the life of your loan. With that information, you can decide if you want to save money by:

• Borrowing less
• Paying extra each month
• Finding a lower interest rate
• Choosing a shorter term loan (15 years instead of 30 years, for example)

Interest Only Loan Payment Calculation Formula

Interest-only loans are much simpler to calculate. For better or worse, you don’t actually pay down the loan with each required payment (although you can usually pay extra each month if you want).

Example: assume you borrow \$100,000 at 6% interest-only with monthly payments.

What is the payment (P)?

Loan Payment Amount x (Interest Rate / 12)

Check your math with the Interest Only Calculator.

Your interest only payment is \$500, and it will remain the same until:

1. You make additional payments (which will reduce your loan balance – but your required payment might not change right away), or
2. After a certain number of years you’re required to start making amortizing payments, or
3. You make a balloon payment to pay off the loan entirely

Figure Out How Much you Own (Equity)

You might also want to know how much of your home you actually own. Of course, you own the home but until it’s paid off, your lender has a lien on the property so it’s not free-and-clear. The amount that’s yours – your home equity – is the home’s market value minus any outstanding loan balance.

There are several reasons you might want to calculate your equity.

Your loan to value (LTV) ratio is important because lenders look for a minimum ratio before approving loans. If you want to refinance or figure out how big your down payment needs to be, you need to know the LTV ratio.

Your net worth is based on how much of your home you actually own. Having a million dollar home doesn’t do you much good if you owe \$999,999 on the property.

You can borrow against your home using second mortgages and home equity lines of credit (HELOCs). But most lenders need to see an LTV below 80% to approve a loan.

Can you Afford the Loan?

Lenders often offer you the largest loan that they’ll approve you for. This is typically based on their standards for an acceptable debt to income ratio. However, you don’t need to take the full amount – and it’s often a good idea to borrow less.

Before you apply for loans, look at your monthly budget and decide how much you’re comfortable spending on a mortgage payment. After you’ve made a decision, start talking to lenders and looking at debt to income ratios. If you do it the other way around, you might start shopping for more expensive homes (and you might even buy one – which will affect your budget and leave you vulnerable to surprises). It’s better to buy less and have some wiggle room than to suffer just to keep up with payments.

Mortgage Calculator

• Monthly Payment (Principal and Interest)

Mortgage calculator for your home loan

This mortgage calculator will show how much your monthly mortgage payment would be, including your amortization schedule. See how much you could save by prepaying some of the principal. Find out your home loan breakdown now by using this simple and free mortgage calculator.

NOTE: This calculator updates automatically as you move from field to field using the “tab” key. If you’re entering prepayment information, click the “calculate” button to see the final results.

A mortgage amortization calculator shows how much of your monthly mortgage payment will go toward principal and interest over the life of your loan. The loan calculator also lets you see how much you can save by prepaying some of the principal.

How to use the loan amortization calculator

With HSH.com’s home loan calculator, you enter the features of your mortgage: amount of the principal loan balance, the interest rate, the home loan term, and the month and year the loan begins.

Your initial display will show you the monthly mortgage payment, total interest paid, breakout of principal and interest, and your mortgage payoff date.

Most of your mortgage loan payment will go toward interest in the early years of the loan, with a growing amount going toward the loan principal as the years go by – until finally almost all of your payment goes toward principal at the end. For instance, in the first year of a 30-year, \$250,000 mortgage with a fixed 5% interest rate, \$12,416.24 of your payments goes toward interest, and only \$3,688.41 goes towards your principal. To see this, click on “Payment chart” and mouse over any year.

Clicking on “Amortization schedule” reveals a display table of the total principal and interest paid in each year of the mortgage and your remaining principal balance at the end of each calendar year. Clicking the “+” sign next to a year reveals a month-by-month breakdown of your costs.

Click “calculate” to get your monthly payment amount and an amortization schedule.

The effect of prepayments

Now use the mortgage loan calculator to see how prepaying some of the principal saves money over time. The calculator allows you to enter a monthly, annual, bi-weekly or one-time amount for additional principal prepayment.To do so, click “+ Prepayment options.”

Let’s say, for example, you want to pay an extra \$50 a month. Using the \$250,000 example above, enter “50” in the monthly principal prepayment field, then either hit “tab” or scroll down to click “calculate.” Initial results will be displayed under “Payment details,” and you can see further details in either the “Payment chart” or “Amortization schedule” tabs.

You may also target a certain loan term or monthly payment by using our mortgage prepayment calculator. Of course you’ll want to consult with your financial advisor about whether it’s best to prepay your mortgage or put that money toward something else, such as retirement.

HSH.com has developed a host of other free mortgage calculators to help answer your other questions, such as, “Can I qualify for a mortgage,” “Will prepaying my mortgage help me save money,” “How large of a down payment do I really need,” “What s the best way to pay for my refinance,” and “When will my home no longer be underwater?” See all of HSH.com’s mortgage calculators.

This is the dollar amount of the mortgage you are borrowing. (Hitting “tab” after entering information in any field will automatically update the calculations.)

The loan’s interest rate. Along with the term, this is the key factor used by the mortgage payment calculator to determine what your monthly payment will be. To see where rates are right now, click on the “See today’s average rates” link to the right of the field, where you can also find offers from our advertising partners.

Mortgage loans come in a range of terms. Fixed rate mortgages are most often found in 30, 20, 15 and 10-year terms; Adjustable Rate Mortgages usually have total terms of 30 years, but the fixed interest rate period is much shorter than that, lasting from 1 to 10 years.

To get the most accurate calculations, use the month and year in which your very first mortgage payment was due (or will be due). If you don’t yet have a mortgage, the current month and year will work just fine.

This display shows the monthly mortgage payment, total interest paid, breakout of principal and interest, and your mortgage payoff date.

This display shows you the total principal and interest paid in each year of the mortgage and your remaining principal balance at the end of each calendar year.

While this display table also shows you the total principal and interest paid in each year of the mortgage and your remaining principal balance at the end of each calendar year, clicking the “+” sign next to a year reveals a month-by-month breakdown of your costs.

In this optional section, you can add in a regular monthly prepayment amount, re-set the calculator to show bi-weekly payments and savings, or even do a one-time prepayment to see how it affects the cost of your home loan.

Mortgage Down Payment

A mortgage down payment is the amount of money you pay upfront when purchasing a home. A down payment, typically expressed as a percentage, is calculated as the dollar value of the down payment divided by the home price.

Select rate

Get a great mortgage with just 5% down

Have a 5% down payment? You re ready to go. Lock in a great mortgage before rates go up!

What is the minimum down payment required in Canada?

The minimum down payment in Canada depends on the purchase price of the home:

• If the purchase price is less than \$500,000, the minimum down payment is 5%.
• If the purchase price is between \$500,000 and \$999,999, the minimum down payment is 5% of the first \$500,000, and 10% of any amount over \$500,000.
• If the purchase price is \$1,000,000 or more, the minimum down payment is 20%.

Mortgage default insurance, commonly referred to as CMHC insurance, protects the lender in the event the borrower defaults on the mortgage. It is required on all mortgages with down payments of less than 20%, which are known as high-ratio mortgages. A conventional mortgage, on the other hand, is one where the down payment is 20% or higher.

According to a recent TD Canada Trust Home Buyers Report 1 , 30% of homebuyers plan to or have at least a 20% down payment, the point at which mortgage default insurance is no longer required.

The size of your down payment influences three things

The amount you put down at the beginning of your mortgage shapes three important outputs over the life of the mortgage:

• The home price you can afford
• The size of your mortgage and monthly payment
• The amount of CMHC insurance you pay

1. Your down payment influences the home price you can afford

Because the minimum down payment in Canada is 5%, this benchmark is used to determine your maximum affordability. Ignoring your income and debt levels, you can infer your maximum purchase price based on the size of your down payment. Because the minimum down payment is a sliding scale, the calculation depends on whether your down payment is more or less than \$25,000.

If your down payment is \$25,000 or less, your maximum home price would be: down payment amount / 5%. For example, if you have saved \$25,000 for your down payment, the maximum home price you could afford would be \$25,000 / 5% = \$500,000.

If your down payment is \$25,001 or more, the calculation is a bit more complex. You can find your maximum purchase price using: down payment amount – \$25,000 / 10% + \$500,000. For example, if you have saved \$40,000 for your down payment, the maximum home price you could afford would be \$40,000 – \$25,000 = \$15,000 / 10% = \$150,000 + \$500,000 = \$650,000.

Naturally, as your affordability is also a function of your income and debt levels, you should visit our mortgage affordability calculator for a more detailed analysis.

2. Your down payment shapes the size of your mortgage and monthly payment

A larger down payment reduces the size of your mortgage, and, therefore, the monthly payment and interest you will pay over the life of your mortgage.

Pay on Time. The Complete Guide to the

Late Payment of Commercial Debts

How to calculate late payment interest and compensation.

What rate of interest can be charged?

At the start of a six-month period the official dealing rate of the Bank of England (the base rate) will be made a fixed “reference rate” for the subsequent six months. The table below shows how this works.

To determine what interest rate you should use when calculating interest on a late payment, you need to add 8% to the “reference rate” that covers the six-month period in which your debt became late.

How do I find the correct base rate to use?

The correct interest rate to be used can be found by viewing this reference rate table.

How do I calculate the interest charge?

The interest owed on a late payment is simple, not compound, interest. It is calculated like this:

Debt times interest rate divided by 365 times the number of days late

Do I calculate inclusive or exclusive of VAT?

You charge interest on the gross amount of the debt (including any element of VAT), but you do not pay VAT on the interest.

If the base rate is 4% for the six-month period when the debt became late, then the statutory interest rate is 12% (4% base rate plus 8%)

If this debt is 30 days late, then the interest owed is: £1,000 x 12% = £120 (the annual rate)

£120 ÷ 365 = 32.9p (the daily rate)

32.9 pence x 30 days = £9.86 (the interest owed to date)

When does the interest stop running?

Interest stops running on a debt once the principal has been paid i.e. once payment is received but not yet cleared if relevant. If the purchaser owes the principal, interest and compensation, unless payment is accepted on other terms, any part payment of the debt will go to reduce the amount of the interest and compensation first.

Compensation arising from late payment

How much compensation am I allowed?

The table below shows how much compensation you are entitled to.

Mortgage Down Payment

A mortgage down payment is the amount of money you pay upfront when purchasing a home. A down payment, typically expressed as a percentage, is calculated as the dollar value of the down payment divided by the home price.

Select rate

Get a great mortgage with just 5% down

Have a 5% down payment? You re ready to go. Lock in a great mortgage before rates go up!

What is the minimum down payment required in Canada?

The minimum down payment in Canada depends on the purchase price of the home:

• If the purchase price is less than \$500,000, the minimum down payment is 5%.
• If the purchase price is between \$500,000 and \$999,999, the minimum down payment is 5% of the first \$500,000, and 10% of any amount over \$500,000.
• If the purchase price is \$1,000,000 or more, the minimum down payment is 20%.

Mortgage default insurance, commonly referred to as CMHC insurance, protects the lender in the event the borrower defaults on the mortgage. It is required on all mortgages with down payments of less than 20%, which are known as high-ratio mortgages. A conventional mortgage, on the other hand, is one where the down payment is 20% or higher.

According to a recent TD Canada Trust Home Buyers Report 1 , 30% of homebuyers plan to or have at least a 20% down payment, the point at which mortgage default insurance is no longer required.

The size of your down payment influences three things

The amount you put down at the beginning of your mortgage shapes three important outputs over the life of the mortgage:

• The home price you can afford
• The size of your mortgage and monthly payment
• The amount of CMHC insurance you pay

1. Your down payment influences the home price you can afford

Because the minimum down payment in Canada is 5%, this benchmark is used to determine your maximum affordability. Ignoring your income and debt levels, you can infer your maximum purchase price based on the size of your down payment. Because the minimum down payment is a sliding scale, the calculation depends on whether your down payment is more or less than \$25,000.

If your down payment is \$25,000 or less, your maximum home price would be: down payment amount / 5%. For example, if you have saved \$25,000 for your down payment, the maximum home price you could afford would be \$25,000 / 5% = \$500,000.

If your down payment is \$25,001 or more, the calculation is a bit more complex. You can find your maximum purchase price using: down payment amount – \$25,000 / 10% + \$500,000. For example, if you have saved \$40,000 for your down payment, the maximum home price you could afford would be \$40,000 – \$25,000 = \$15,000 / 10% = \$150,000 + \$500,000 = \$650,000.

Naturally, as your affordability is also a function of your income and debt levels, you should visit our mortgage affordability calculator for a more detailed analysis.

2. Your down payment shapes the size of your mortgage and monthly payment

A larger down payment reduces the size of your mortgage, and, therefore, the monthly payment and interest you will pay over the life of your mortgage.

What Does a Mortgage Payment Consist Of?

More fun and exciting mortgage Q A: “What does a mortgage payment consist of?”

Have you ever been curious what you’re paying each month to live in your shiny new (or possibly dingy old) home or condo?

A mortgage payment, assuming it s not an interest-only loan, generally consists of four key items:

• a principal portion
• an interest portion
• property taxes
• homeowners insurance

Mortgage Payment = PITI

There’s a handy acronym to sum up the mortgage payment breakdown known as PITI. When you say it, it sounds like pity. And I suppose it is a pity that we have to make mortgage payments every month, often for a staggering 30 years or 360 months, but I digress.

Anyway, mortgage lenders typically want X number of months of PITI for cash reserves if you’re verifying assets when you apply for a mortgage. In short, this tells the underwriter you can actually pay back the loan, at least for a few months

Lenders will also use the PITI payment to determine your monthly housing expense, which is then used to calculate your DTI ratio. So it s pretty important!

The principal portion of your mortgage payment is essentially the amount of debt you are borrowing, which eventually transitions into your ownership in the home, also known as home equity.

The interest portion of your mortgage payment is the cost of borrowing that money for the loan, or the expense the bank or mortgage lender charges for taking on the risk.

The tax portion of the mortgage payment is paid to the local government based on the assessed property value and tax rate for the area.

Finally, the insurance portion of the mortgage payment covers homeowners/hazard insurance, which protects the borrower (and lender) from a number of dangers and provides liability coverage.

For those with a mortgage impound account (typically required for a high LTV loan), taxes and insurance are paid monthly with the mortgage payment.

If you aren t subject to impounds, you must pay taxes and insurance directly to the tax office/insurer, and the mortgage payment each month will consist of only principal and interest.

This can be a relief on a monthly basis, but make sure you stash enough cash to pay for taxes and insurance when they are due. I ve had friends who forgot they were on the hook for a big property tax bill, and didn t save accordingly.

Note: If your loan-to-value exceeds 80 percent on a single loan, you’ll also have to pay mortgage insurance on top of the aforementioned, which is one reason why putting 20% down can be a smart move.

And the mortgage payment on an interest-only loan consists of just interest, taxes, and insurance, meaning you can only build equity in your home if the property value appreciates.

If we re talking about a negative amortization loan, such as the once popular option arm, making the minimum payment wouldn t even cover the interest due each month. Of course, you d still have to pay the required taxes and insurance.

* You may also see the acronym PITIA, which stands for principal, interest, taxes, insurance, and association dues. This may apply if there is an HOA that charges due for your property each month.

How Are Mortgage Payments Applied?

In the beginning of the loan term, mortgage payments primarily go toward paying off interest because the loan balance is so high.

While this may be viewed as a negative, it does mean mortgage interest tax deductions are bigger and more beneficial early on.

Over the years, as the outstanding balance decreases, more of the monthly mortgage payment will go toward principal each month until you eventually own the home outright. This is how amortization works.

It also explains why some savvy homeowners choose to make biweekly mortgage payments, thereby increasing the amount of principal paid early on and decreasing the amount of interest paid over the life of the loan.

Doing so will also shorten your mortgage term, which is beneficial if you want to own your home sooner, but don t want the commitment of larger payments associated with certain loan programs such as the 15-year fixed.

As a rule of thumb, the longer your loan term, the more you ll pay in interest because the loan is paid off slower. If you re able to accelerate your payoff, you ll pay less interest.

What Will My Mortgage Payment Be?

• principal
• interest
• real estate taxes
• HOA dues
• mortgage insurance
• flood insurance
• homeowners insurance

If you re trying to figure out what you ll be paying your lender each month, consider all the ingredients of a mortgage payment and your mortgage rate.

As noted, if you ve got an impound account, add up the principal, interest, taxes, and insurance. Those last two bits will be determined by your lender, so ask them to break it down.

The principal and interest portion is something you should be able to calculate on your own. Simply plug your loan amount and interest rate into a mortgage calculator to figure out the monthly payment.

If it s interest-only, plug those two items into an IO calculator. Principal will no longer be part of the equation.

Don t forget the extras. Do you need to pay mortgage insurance premiums each month? For example, there are monthly mortgage insurance premiums on FHA loans that must be paid.

What about monthly HOA dues? If it s a condo, there probably are, though you might pay them separately to the association and not your lender.

Either way, it s good to know what your total housing payment will be so you can budget accordingly.

The payments you see advertised typically only include principal and interest. That makes them look relatively cheap. Once everything else is added, the payment can look a whole lot different.

In summary, no one enjoys making mortgage payments every month, but knowing where that money is actually going should make you a more informed borrower. And it could even save you some money!

Mortgage Calculator Canada, Calculate Mortgage Payment, how to calculate a mortgage payment.#How #to #calculate #a

Our mortgage payment calculator calculates your monthly payment and shows you the corresponding amortization schedule. If you are purchasing a home, our payment calculator allows you to test down payment and amortization scenarios, and compare variable and fixed mortgage rates. We also help you calculate CMHC insurance and land transfer tax.

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Secure a great mortgage rate and lock in your monthly mortgage payment now.

How to estimate mortgage payments

There are a number of factors that go into estimating how much your regular mortgage payments will be. The most important numbers are the total mortgage amount (the price of the home, less the down payment, plus mortgage insurance if applicable), the amortization period (the number of years the mortgage payments will be spread across), and the mortgage rate (the rate of interest paid on the mortgage).

To use the calculator, enter the purchase price, and select your amortization period and mortgage rate. Then you can see how your payment will be affected by the size of your down payment and frequency of payments. Our calculator also shows you what the land transfer tax will be, and approximately how much cash you’ll need for closing costs. You can also use the calculator to estimate your total monthly expenses, see what your payments will be if mortgage rates go up, and show what your outstanding balance will be over time. It is a good idea to use the calculator to determine what you can afford before you start looking at real estate listings.

If you’re renewing or refinancing and know the total amount of the mortgage, use the “Renewal or Refinance” tab to estimate mortgage payments without accounting for a down payment.

How to lower your mortgage payments

There are a few ways to lower your monthly mortgage payments. You can reduce the purchase price, make a bigger down payment, extend the amortization period (if your down payment is less than 20%, the maximum is 25 years), or choose a lower mortgage rate. Use the calculator above to try different variables to see what your payment will be with different scenarios.

Is your mortgage payment calculator free?

Absolutely! Our calculators, website and rate comparisons are completely free for users. Ratehub.ca earns revenue through advertising. We promote the lowest rates in each province offered by brokers, and allow them to reach customers online.

Why does your monthly calculator have four columns?

We think it’s important for you to compare your options side by side. We start the calculator by outlining the four most common options for down payment scenarios, but you are not limited to those options. We also allow you to vary amortization period as well as interest rates, so you’ll know how a variable vs. fixed mortgage rate changes your payment.

How do payments differ by province in Canada?

While majority of the mortgage regulation in Canada is consistent across the provinces (minimum down payment 5%; maximum amortization period 35 years), there are some things that do vary. This table summarizes the differences:

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Pay on Time. The Complete Guide to the

Late Payment of Commercial Debts

How to calculate late payment interest and compensation.

What rate of interest can be charged?

At the start of a six-month period the official dealing rate of the Bank of England (the base rate) will be made a fixed “reference rate” for the subsequent six months. The table below shows how this works.

To determine what interest rate you should use when calculating interest on a late payment, you need to add 8% to the “reference rate” that covers the six-month period in which your debt became late.

How do I find the correct base rate to use?

The correct interest rate to be used can be found by viewing this reference rate table.

How do I calculate the interest charge?

The interest owed on a late payment is simple, not compound, interest. It is calculated like this:

Debt times interest rate divided by 365 times the number of days late

Do I calculate inclusive or exclusive of VAT?

You charge interest on the gross amount of the debt (including any element of VAT), but you do not pay VAT on the interest.

If the base rate is 4% for the six-month period when the debt became late, then the statutory interest rate is 12% (4% base rate plus 8%)

If this debt is 30 days late, then the interest owed is: £1,000 x 12% = £120 (the annual rate)

£120 ÷ 365 = 32.9p (the daily rate)

32.9 pence x 30 days = £9.86 (the interest owed to date)

When does the interest stop running?

Interest stops running on a debt once the principal has been paid i.e. once payment is received but not yet cleared if relevant. If the purchaser owes the principal, interest and compensation, unless payment is accepted on other terms, any part payment of the debt will go to reduce the amount of the interest and compensation first.

Compensation arising from late payment

How much compensation am I allowed?

The table below shows how much compensation you are entitled to.