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What is a mortgage payment?

A mortgage payment is the amount of money that must be paid toward your mortgage loan on a regular basis, with the purpose of paying it off, over the mortgage’s amortization period. The mortgage payment partially goes toward the principal debt amount, with the rest going toward the interest on the loan. The amount of interest you pay is determined by the mortgage rate you have during your mortgage’s term.

Your mortgage payment may also cover mortgage default insurance – also referred to as CMHC insurance – if you are a high-ratio borrower who has paid less than 20% down on your home’s purchase. Property taxes and other fees can also be rolled up into your mortgage payment, if you agree to do so with your lender.

At the beginning of your mortgage, the bulk of your payment goes toward your interest costs, but more will eventually go towards your principal balance over time.

What are some factors that can affect your mortgage payments?

The factors that may influence the size of your mortgage payment include:

• The home’s purchase price: This determines how much you will need to borrow for your mortgage.
• Your down payment: The more you are able to pay up front towards the purchase of your home, the smaller your required mortgage amount. In turn, the smaller your monthly mortgage payment will be.
• Your total mortgage amount: This is the price of your new home, minus the down payment, plus mortgage insurance, if applicable.
• Your interest rate: The lower your mortgage’s interest rate, the less you’ll pay on interest – and the smaller your overall mortgage payment will be. This is why it’s crucial to shop around for the best possible rate. Using a comparison tool like Ratehub.ca’s best mortgage rates table can help you browse all of the options available in the Canadian marketplace.
• Whether your mortgage type is fixed or variable: While variable rate mortgages tend to historically be cheaper over time, they’re exposed to fluctuations from the Bank of Canada; if it’s a rising interest rate environment, variable-rate mortgage holders could end up paying more.
• The length of your amortization period: The longer your overall mortgage payment period, the more you’ll pay in interest. However, stretching your mortgage out over a longer time period also reduces the size of your monthly payments.
• The frequency of your payments: While the most typical payment structure is monthly, some mortgage products allow for bi-weekly or accelerated payments which can also reduce their size.
  

Why should you use a mortgage payment calculator?

It can be easy to focus on the overall purchase price of a home – but it’s actually the size of your regular mortgage payment that will determine your ability to afford that property. This is the amount you’ll need to dedicate to shelter costs from your paycheque each month, and will impact every other aspect of your budget and cost of living.

How do I get approved for a mortgage?

Here’s a list of what mortgage lenders are looking for when considering a borrower for a mortgage:

• A good credit score: A minimum credit score of 680 or higher is required to qualify for the best mortgage rates that allow for the lowest monthly mortgage payments. To qualify for any mortgage at all, you’ll need a credit score of at least 560.
  
• Proof of income: You’ll need to provide proof of income in the form of pay stubs and/or tax documents like your Notice of Assessment (NOA). If you recently started a new job, even with proof of income, many lenders will want to see that you’ve held the position for at least a year.
• Ability to pass a mortgage stress test: You will need to pass a mortgage stress test, which ensures that you can still afford your mortgage payments at a rate known as the “qualifying rate”, set by the Office of the Superintendent of Financial Institutions (OSFI), or your contract rate + 2%, whichever is the higher of the two.
  
• Down payment: The more you can put down at the time of your home’s purchase, the more equity you’ll have in the property, and the stronger your borrower profile will be to your lender. Those who pay 20% or more on their homes are considered “low-ratio” borrowers; because they have more equity in their property, they pose less of a default payment risk. Those who pay less than 20% are considered “high-ratio” borrowers, and are required to take out mortgage default insurance, the premiums of which are typically paid within the mortgage payments.

The minimum down payment you’ll need to have depends on the home you’re looking to buy:

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 or find a lower mortgage rate. Use the calculator to see what your payment would be in different scenarios.

You can also accelerate your mortgage payments, or make a lump sum prepayment, if your mortgage product allows for it.

More mortgage calculators

• Mortgage Affordability Calculator
• Land Transfer Tax Calculator
• Mortgage Default (CMHC) Insurance Calculator
• Mortgage Refinance Calculator
• Mortgage Penalty Calculator
• Amortization Calculator

For further information, check out these helpful pages!

• Best Mortgage Rates in Canada
• Variable or Fixed Mortgage Rates
• Amortization
• Mortgage Default Insurance (CMHC Insurance)
• Open vs. Closed Mortgage: What's the Difference?
• Mortgage Terms Glossary
• Mortgages