Navigating the mortgage market is no easy feat, especially when determining how much home you can afford. With a plethora of options available, utilizing a mortgage calculator can simplify this process. Here, we’ll guide you through the essential steps to accurately assess affordability using a mortgage calculator.
1. Introduction to Mortgage Calculators
A mortgage calculator is a digital tool designed to help potential homebuyers estimate their monthly mortgage payments based on several factors, including the loan amount, interest rate, and loan term.
2. Accessing a Reliable Mortgage Calculator
2.1. Visit Shelto Mortgage Brokerage’s website. We offer a comprehensive mortgage calculator tailored for the Canadian market.
2.2. You can also find mortgage calculators on various financial websites, banks, and mobile apps, but ensure they are specific to Canadian mortgages.
3. Key Terms and What They Mean Before inputting data, familiarize yourself with terms:
3.1. Loan Amount: This is the total amount you intend to borrow.
3.2. Interest Rate: The percentage charged by the lender for the use of its money.
3.3. Loan Term: The number of years you’ll take to repay the loan. Common terms are 15, 20, or 30 years.
3.4. Property Taxes: Annual taxes levied by local governments on properties.
3.5. Home Insurance: The annual cost to insure the property against damages.
3.6. PMI (Private Mortgage Insurance): Required if your down payment is less than 20% of the home’s value.
4. Entering Your Information
4.1. Loan Amount: Deduct your down payment from the home’s purchase price. Example: If a home costs $500,000 and you’re making a 20% down payment ($100,000), your loan amount would be $400,000.
4.2. Interest Rate: Shelto’s website provides current rates, but for our example, let’s assume a rate
of 3.5%.
4.3. Loan Term: We’ll use a 30-year term for this demonstration.
4.4. Property Taxes and Home Insurance: If you’re uncertain about these figures, Shelto can provide estimates based on average rates for your desired property’s location.
4.5. PMI: If applicable, this will be calculated as a percentage of your loan amount.
5. Assessing the Results once you’ve inputted all data:
5.1. Monthly Payment: This is the sum you’d pay monthly, which includes the principal and interest, property taxes, home insurance, and possibly PMI.
5.2. Total Interest Over the Term: It reveals how much interest you’ll pay over the loan’s entirety.
5.3. Total Cost of the Mortgage: This figure includes both your loan amount and the total interest paid.
6. Adjusting Parameters for Different Scenarios
6.1. Experiment with different down payments. Increasing your down payment can significantly lower your monthly payments.
6.2. Test varying interest rates. A 0.5% change in interest rate can lead to substantial savings over the loan’s life.
6.3. Alter the loan term. Shorter terms, like 15 years, will increase monthly payments but save on long-term interest.
7. Incorporating Additional Costs
While mortgage calculators offer valuable insight into monthly payments and interest, remember to account for other costs:
7.1. Closing Costs: Typically 2-5% of the loan amount.
7.2. Maintenance and Repairs:
As a homeowner, always be prepared for unexpected repair bills.
7.3. Utilities: If you’re moving from an apartment to a larger home, expect utility bills to rise.
7.4. Homeowners Association (HOA) Fees: If purchasing in a community with an HOA, these fees can be a significant monthly expense.
8. Using the Calculator for Refinancing
If considering refinancing your current mortgage:
8.1. Input your remaining loan balance as the loan amount.
8.2. Use the current market interest rates.
8.3. Adjust the loan term based on how many years you wish to extend or reduce your mortgage.
9. Conclusion
Mortgage calculators, like the one provided by Shelto Mortgage Brokerage, are indispensable tools for prospective homebuyers. By understanding and utilizing them correctly, they can offer a clear view of potential financial commitments, ensuring you make an informed decision when stepping onto the property ladder. Remember, while these tools provide a solid estimate, consulting with a mortgage expert at Shelto
can give personalized advice tailored to your unique financial situation.