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Using a Mortgage Payment Calculator in Canada

Mortgage payment calculators are useful tools that enable you to estimate your monthly payment and amortization schedule. By using these resources, you could potentially save money and pay off your mortgage faster.

To begin, select your home value, down payment amount and interest rate type. Next, decide on a term length, amortization period and payment frequency. Additionally, you can enter additional prepayments to see how they would impact your total mortgage balance and payments.

Amortization period: This is the length of time you must pay off your mortgage, including both principal and interest. On average, amortization takes 25 years; however, you may opt for a shorter term or make extra payments to reduce it sooner.

Term Length: Most mortgage terms in Canada range from one to five years, though longer options are often available depending on borrowers’ needs. Lenders will provide various term lengths with varying mortgage rates depending on the length selected.

At the end of your current mortgage term, you have two options: switch between different loan terms with the same lender for a new one or renew with them for another term. This gives you an opportunity to evaluate your financial standing every few years and potentially refinance at a better rate than before.

Utilize Accelerated Payment Options: These are payment frequencies that add up to the same amount paid annually, but make your mortgage principal balance decrease faster. Available options include monthly, semi-monthly, bi-weekly and weekly payments.

In addition to the option of accelerating your mortgage payments, you also have the option of deferring some or all of them. Many lenders provide this choice and it should be taken into account if you want to reduce overall interest costs.

CMHC insurance: With insured mortgages, your loan is protected by the Canada Mortgage and Housing Corporation (CMHC). However, you may want to avoid taking out this mortgage if you plan on moving out of Canada in the future or don’t have a reliable source of income that can sustain it.

Lump Sum Payment Option: If you receive a lump sum like a tax refund, inheritance or bonus and can afford it, apply it towards your mortgage. This will be reflected in the calculator’s principal and interest calculations, which should lower your monthly payment accordingly.

Making Extra Payments: If you have enough money, consider making an additional mortgage payment each month to reduce your principal balance and pay off the loan sooner. This will lower your interest cost, making it a worthwhile investment – particularly if you have high-interest credit card or other debt that could be paid off with this extra money.

Skipping a Mortgage Payment: Most Canadian lenders allow for the skipping of payments, though some only take lump sum prepayments. Doing so will reduce your monthly mortgage payment; however, in order to resume regular payment status you may need to make another prepayment.

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