Using a Mortgage Calculator to Accurately Determine Your Budget
Caught in the rush and thrill of first-time home shopping, it can be easy to overlook, or omit considering, the various essential costs associated with a property purchase. These mean costs in addition to the down payment and mortgage installments you will have to make monthly. To correctly determine exactly what you really can afford, you must factor in mortgage insurance and association/condominium fees, if applicable, closing costs, property taxes, urgent repairs, and other necessary expenses.
Your greatest asset, in this time of formulating your home purchase financial plan, is a mortgage calculator. Mortgage calculators will take into consideration the percentage of the property you procure upfront in the form of a down payment, the interest rate for the current term of your mortgage, and the amortization, or number of years overall in which you have to pay down your mortgage, and deduce what you can expect to pay monthly. They will even give you a breakdown of exactly what you will be paying toward both principal and interest over the entire life of your mortgage.
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About Canadian Mortgage Calculators
Mortgage calculators also factor in your mortgage insurance payments, but if they don't, be sure to add these premiums to your budget yourself. Mortgage insurance is necessary in Canada if you are putting less than 20 per cent of the sale value of your property purchase down, and recommended even if you are able to allocate more to your down payment.
CanEquity Mortgage offers an excellent mortgage affordability calculator that allows you to input your annual income, property taxes, condominium fees, if relevant, monthly heating costs and even current payments you are making toward any outstanding debts. This calculator will deduce for you the maximum property value you can afford, the maximum mortgage you can take on, and the maximum monthly mortgage payments your budget has space for, as well as the CMHC mortgage loan insurance premium you will be paying for coverage on your mortgage.
Play around with various mortgage calculators, and note the difference one percentage point in an interest rate can make over a five-year term. Also remember that property taxes will vary significantly depending on neighborhood, province or region and size of property, as will home heating costs. Do your research, and truly know what you can afford before you commit to a mortgage larger than what pragmatics dictate fits into your financial realm.
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