Mortgage Amortization Calculator
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Enter the amount that you will pay upfront
toward the property to obtain a mortgage
CMHC mortgage insurance is required on all
mortgages with down payment less than 20%
Total mortgage amount is calculated by subtracting
the down payment from the property price and adding
CMHC mortgage insurance (if applicable)
Amortization period is length of time that it would take
the mortgage holder to pay off the mortgage in full
Mortgage term is the duration of time that you
are committed to a lender, rate and conditions
Mortgage rate is the interest rate that you will
be paying on the outstanding balance for the
duration of the mortgage term
Mortgage Amortization Schedule
End of Mortgage Term
Mortgage Amortization In Canada
What Exactly Is Mortgage Amortization?
The easiest way to understand what mortgage amortization is is to think of it in two parts…an amortization schedule and an amortization period. An amortization schedule is a recorded payments table, so in other words, it is a listing of all the payments that are made towards your mortgage, the total amount that you paid (what is applied towards the principal and the amount applied to the interest), and the balance due after each payment. An amortization period is basically the number of years that your mortgage is set up for with the anticipation of the full balance of the mortgage being paid off.
Mortgages are also made up of a mortgage rate (commonly referred to as the interest rate), which can change during the life of the mortgage, depending on what type of mortgage terms you have. A variable rate mortgage is set to the prime rate and will affect the interest rate on your mortgage principal should the prime rate move up or down. An adjustable rate mortgage is also set to the prime rate and will affect the monthly interest amount should the prime rate move up or down. A fixed rate mortgage locks in a mortgage rate for a set term.
What Is A Mortgage Term?
A mortgage term is a set timeframe within the mortgage agreement/contract that the mortgage rate is set or fixed, and it is at this time that a mortgage can be paid out in full or renegotiated/renewed with a new term and sometimes a different mortgage rate. This is typically when mortgagees take the opportunity to switch to a different lender that may be offering a lower interest rate, which is called refinancing.
The mortgage market is competitive, so being diligent in your investigation about so called mortgage ‘deals’ before signing up with a different lender (the grass is not always greener on the other side). You may see offers such as ‘cash back’ and ‘prepayment privilege’ and generally you may see a small savings at the beginning of a new mortgage with a different lender, but make sure there are zero hidden charges, fees, or costs that can snag you up financially down the road like monetary penalties.
Are You Worried About Having A Down Payment?
Guess what? You are not alone. Many home buyers nowadays have not had the luxury of being able to tuck away at least 20% of the value of the home they wish to buy. So, what happens when you do not have a substantially large down payment, yet you have been preparing financially to buy a home? Without the presence of a sizeable down payment, home buyers are required to obtain Mortgage Default Insurance as a security for the lender against the mortgage (this is good news, as instead of a large lump sum down payment, you can pay the insurance premium over the life of the mortgage!).
Many home buyers are now keeping their saved funds for closing expenses on their new home and just picking up the added expense of insurance instead. Now for the downside of Mortgage Default Insurance…you will be considered a higher risk to the lender, which usually translates into a higher mortgage rate and you may be required to undergo the Government Stress Test. Therefore (in a nutshell), you will pay more for your mortgage without that hefty down payment saved up.
Unraveling Mysterious Mortgage Terminologies
Mortgages are jam-packed with numerous factors that makes up the 'mortgage' and can be very confusing for first time home buyers. Below is a short list of commonly questioned & mortgage-related wording.
If you decide to pay off your mortgage BEFORE the end of the mortgage contract agreement, or you wish to drop a lump sum onto your mortgage, you would be making a prepayment. A prepayment basically lowers the principal amount of your mortgage, which has two ‘ripple effects’…you will lower the principal amount that needs to be repaid and you will pay less interest on the principal amount of the mortgage. Unless you have a ‘prepayment privilege’ clause with your mortgage contract that allows you to make a prepayment, you will most likely be slammed with a prepayment penalty (a substantial fee that your lender will charge you because you will be taking away some of the interest money that the lender would otherwise be profiting!).
Before a home buyer can close the deal on their new home, there will be what are called closing costs. These costs usually cover a home inspection if required, lawyer costs, fire insurance/home insurance, title insurance, relator fees, appraisal fees, property tax transfers, etc.
Equity on a home is basically the dollar difference between the potential selling price of a home and the amount of money still owing on a mortgage tied to the same home. The more you pay down your mortgage, the more equity you will ‘grow’ in the home. A Home Equity Line of Credit (often referred to as a HELOC) is a line of credit approved by the lender to ‘tap into’ a percentage of any grown equity in the home. An Equity Take Out Mortgage is another type of loan that can be borrowed against grown equity on the home.
In Canada, mortgage rates/interest rates are compounded twice in one year. Compounding interest means that twice a year, any unpaid mortgage interest is added directly onto the principal amount by law (with only a variable rate mortgage being the only mortgage type exception).
During the life of a mortgage, the balance that is owing is the mortgage balance (the remaining sum of the accrued interest and the principal amount).
In the event of a default (non-payment on the mortgage), the mortgage holder has the first place claim on any assets.
In the event of a default, the mortgage holder has the second place claim on any assets.
A third mortgage is a lien on a property junior or subordinate to the first and second mortgages.