1. How to Estimate Mortgage Payments

To help you calculate your mortgage payments, the Bequest Mortgage Payment Calculator uses the following key variables:

• Mortgage Principal Amount: This is the total amount you’ll need to borrow for your home purchase after subtracting your down payment.
• Term and Interest Rate: Select a mortgage term and interest rate that best align with your financial goals and repayment timeline.
• Amortization Period: Decide the number of years you’ll take to pay off the full mortgage balance, which will impact your monthly payments.
• Payment Frequency: Choose how often you’d like to make mortgage payments – options may include monthly, bi-weekly, or weekly.

Understanding these variables helps you estimate your payments and plan your finances more effectively.

Learn More about mortgage terms that can affect your payments.

2. Key Considerations for Your Mortgage Payments

Buying a home is a significant investment, and it’s natural to want the best interest rate and lowest possible payments. Here are some key factors that will influence your mortgage payments:

• Location, Location, Location: The region or province where you purchase your home can affect your mortgage interest rates.
• Amount You Borrow: Your loan amount equals the price of your home minus your down payment, plus any mortgage default insurance if your down payment is less than 20%. The higher the loan amount, the higher your payments, assuming the same amortization period.
• Fixed vs Variable Interest Rates: With a fixed-rate mortgage, your interest rate and payments remain constant for the term of your mortgage, offering stability. With a variable-rate mortgage, your interest rate changes based on market conditions. If the interest rate rises, a larger portion of your payments will go toward interest rather than the principal, potentially extending your mortgage’s duration.

3. How to Get Approved for a Mortgage

Applying for a mortgage can be a complex process. Here are a few things to consider before submitting your application:

• Current Debts: If you have existing loans, such as a car loan or student debt, consider paying off as much as you can before applying for a mortgage. Avoid taking on new debt during this time.
• Understand Your Finances: Your total housing payments (including taxes and utilities) should ideally be no more than 35% of your gross income. This will help you maintain financial stability and improve your approval odds.
• Down Payment: Decide how much you can put down on your home. In Canada, buyers with less than 20% down are required to have mortgage default insurance, which can affect your total borrowing cost.
• Credit Score and History: Your credit score and history play a big role in determining how much you can borrow and the terms of your mortgage. Make sure you have a good understanding of your credit report before applying.

4. What is a Mortgage Payment?

A mortgage payment consists of both principal and interest.

• The principal: is the amount you originally borrowed to buy your home, and over time, as you make payments, this amount decreases.
• The interest: is the cost of borrowing money, and early on, most of your payments go toward paying off the interest.

Over time, as your mortgage principal decreases, a larger portion of your payments will go toward paying down the principal, reducing your overall loan balance.

5. How to Pay Off Your Mortgage Faster

While a mortgage is typically a long-term financial commitment, there are ways to pay it off faster and save on interest:

• Make Lump-Sum Payments: If your mortgage allows, making lump-sum payments directly toward the principal can significantly reduce the time it takes to pay off your loan and save on interest in the long run.
• Increase Payment Amounts: Depending on your mortgage agreement, you may be able to increase your regular payments by up to 100%. This helps reduce the amount of interest you pay and shortens your mortgage term.

Subject to prepayment privileges in your mortgage contract.

Learn More about mortgage payment features available to Bequest clients.