Mortgages: How to determine your mortgage payments

Determine your payment amount

When you enter the real estate market to buy a property, you will most likely need to obtain a mortgage from a bank. Once you are approved for a mortgage, you will be required to make regular payments until the full amount of the mortgage is paid off. However, different aspects will determine the amount of your regular payments:

Mortgage rate: Simply put, the higher the interest rate, the higher your payments will be. A mortgage rate can vary considerably depending on where you get your mortgage, as well as the current economic scenario.
The amount of the mortgage: Of course, it’s obvious: the more you borrow, the higher your payments will be. In addition, if you make a down payment of less than 20% in Canada, you will have to pay CMHC insurance.
Frequency of payments: The more payments you make in a year, the smaller the payments will be.
Amortization period: Simply put, this is the length of your mortgage, and the longer it is, the lower your regular payments will be. However, the overall reimbursement amount will also be higher.

What are the different types of mortgage payment frequencies?

Monthly mortgage

A monthly mortgage payment will be withdrawn from your bank account on a fixed day each month. This means that you will make 12 payments per year. This is the most conventional mortgage frequency.

Bi-monthly mortgage

The biweekly mortgage payment is withdrawn from your bank account every two weeks. This means you will make 26 payments per year. This may be more beneficial for those paid bi-weekly rather than weekly or monthly.

Accelerated bi-monthly mortgage

As with standard bi-weekly payments, where you pay your mortgage every two weeks, the calculation to determine your payments is slightly different. To get the amount of each payment, you divide your conventional monthly payment by 2. In contrast, the standard bi-monthly payment multiplies the monthly by 12 and then divides it by 26.

Example:

Monthly = $1,500
Semi-monthly = ($1,500 x 12)/26 = $692
Accelerated = ($1,500/2) = $750.

As you can see, the accelerated bi-monthly payments are slightly higher.

Weekly mortgage

As the name implies, this is a weekly payment on your mortgage. This amount is calculated by taking your monthly mortgage, multiplying it by 12 and dividing it by 52. It is advantageous for those who are paid weekly or who wish to spread out payments as much as possible.

Accelerated Weekly Mortgage

Similar to the accelerated biweekly, it is calculated the same way. You take your monthly payment and divide it by 4 to get your weekly payment. This amount will be slightly higher than your standard weekly mortgage payment.

Example:

Monthly = $1,500
Weekly = $346
Accelerated = $375

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Determine your payment amount

Mortgage rate: Simply put, the higher the interest rate, the higher your payments will be. A mortgage rate can vary considerably depending on where you get your mortgage, as well as the current economic scenario.
The amount of the mortgage: Of course, it’s obvious: the more you borrow, the higher your payments will be. In addition, if you make a down payment of less than 20% in Canada, you will have to pay CMHC insurance.
Frequency of payments: The more payments you make in a year, the smaller the payments will be.
Amortization period: Simply put, this is the length of your mortgage, and the longer it is, the lower your regular payments will be. However, the overall reimbursement amount will also be higher.