It can also include mortgage default insurance, also sometimes known as CMHC insurance (required when your down payment is less than 20% of the cost of your home), property taxes and other fees. Your mortgage payment covers both the principal (the actual amount of the loan) and the interest on the loan. Your mortgage payment is the amount of money you must pay every month to pay down, and ultimately pay off, your mortgage loan. After all, your mortgage payments are the amount that you'll need to take from your paycheque each month. But actually, the most relevant number to you will be your regular repayment. When planning to buy a home, it's easy to focus on the final purchase price or your mortgage amount. A general affordability rule, as outlined by the Canada Mortgage and Housing Corporation, is that your monthly housing costs should not exceed 32% of your gross household monthly income. The monthly mortgage payment is calculated based on the inputs you provided: the mortgage amount, rate type (fixed or variable), term, amortization period, and payment frequency. Fixed rates are most popular in Canada and represent 66% of all mortgages, according to the Canadian Association of Accredited Mortgage Professionals (CAAMP). The mortgage rate type can be fixed for the duration of the term or variable, fluctuating with the prime rate.
The mortgage term is the length of time you commit to the terms, conditions and mortgage rate with a specific lender. The mortgage type includes the term of the mortgage, between 1-10 years, and the rate type, variable or fixed. Longer amortization periods allow homeowners to make smaller monthly payments, but equate to more interest paid over the life of the mortgage. In Canada, the maximum amortization period for insurable mortgages is 25 years.
The length of time it will take a homeowner to pay off his/her mortgage. Mortgage default insurance is calculated as a percentage applied to your mortgage amount. Mortgage default insurance is required on all mortgages with down payments of less than 20%, which are known as high ratio mortgages. Mortgage default insurance, commonly referred to as CMHC insurance, protects the lender in the case the borrower defaults on the mortgage. For down payments of less than 20%, home buyers are required to purchase mortgage default insurance, commonly referred to as CMHC insurance. The minimum down payment in Canada is 5%. The amount of money you pay up front to obtain a mortgage.