If you are thinking about buying a home in Ontario the best
way to figure out how much of a home you can afford to buy is to use an Ontario
mortgage amortization calculator. There are many mortgage amortization
calculators available online on various websites including the banks websites.
Before using the Ontario mortgage amortization calculator to
calculate your payments, first consider how much of your income can be
allocated towards a mortgage payment. In Canada, any time a purchaser wants to
purchase a home with less than a 20% down payment and finance their mortgage
through the bank, CMHC must approve their mortgage for high ratio insurance.
CMHC guidelines state that no more than 32% of the home buyers gross income can
be consumed by housing payments. Housing payments are comprised of the new
mortgage payment, the property taxes and include $100 for heat.
If you take your gross monthly income, multiply it by 32%
and then subtract an estimated monthly amount for property taxes and heat, the
amount left over is your maximum allowable mortgage payment under CMHC mortgage
guidelines.
Now when you open an Ontario mortgage amortization calculator
you will see 6 fields. You will be prompted to enter the amount of the
mortgage, interest rate of the mortgage, interest compounding period, payment
frequency, term and amortization. Enter a mortgage amount, interest rate and
choose monthly for your payment frequency. When indicating how the interest
will compound; if you plan to take out a variable rate mortgage select “monthly
compounding”, if you plan to take out a fixed rate mortgage select
“semi-annually compounding”. CMHC will high ratio insure a maximum amortization
of 30 years, so that is the maximum amortization you can place in the
amortization field.
Next you will click calculate on the Ontario mortgage
amortization calculator. Compare the monthly payment to the monthly payment you
calculated based on CMHC lending guidelines. If the payment is lower than the
one you calculated based on CMHC lending guidelines then this indicates that
you can either obtain a higher mortgage or if the amount you indicated was
based on the amount you want to spend already you can reduce your amortization
to see how much faster you can get paid off.
If the payment on the Ontario mortgage calculator is higher
than the one you calculated based on CMHC lending guidelines then to obtain the
size of mortgage that your calculation was based on will mean that you have to
make a larger down payment.
Some websites offer an Ontario mortgage calculator that is called a “maximum mortgage estimator”. This Ontario mortgage calculator enables you to input the amount of monthly payment that you can afford to pay and then will tell you the maximum mortgage that you qualify to finance again based on CMHC guidelines.
The reason Ontario mortgage calculators are important is
because they enable you to get an idea of what you actually qualify to finance
before you go out shopping for a home. There is nothing worse than finding your
dream home only to learn that you can't afford it.
For more information about how to use an Ontario mortgage
calculator or to see if you qualify to be pre-approved for a mortgage please
contact Paul Mangion at 416-204-0156 or visit www.gtamortgagematters.com.
