How to Use a Mortgage Calculator to Determine Affordability

A mortgage calculator can be an invaluable tool for planning your home purchase and understanding what you can afford. This guide provides a step-by-step process on how to use a mortgage calculator effectively.

  1. Understand What a Mortgage Calculator Is

A mortgage calculator is a digital tool that helps you understand what your mortgage payment might look like based on variables such as loan amount, interest rate, and loan term.

  1. Find a Mortgage Calculator

There are numerous mortgage calculators available online, including on the Shelto website. These calculators are usually free to use and can provide instant estimates of your potential mortgage payment.

  1. Enter the Price of the Home

Start by entering the price of the home you’re considering. If you’re not sure what price range to consider, start with a figure based on what you can afford for a monthly payment and your available down payment.

  1. Input Your Down Payment

Next, enter the amount you plan to put down on the house. The minimum down payment in Canada typically ranges from 5% to 20% or more, depending on the home’s price and the type of mortgage.

  1. Set the Mortgage Term

The mortgage term is the number of years over which you’ll repay the loan. In Canada, the most common term for a mortgage is 25 years, but shorter and longer terms are also available.

  1. Input the Interest Rate

Enter the interest rate you expect to pay on your mortgage. You can use current mortgage rates as a guide, but remember that your actual rate will depend on various factors, including your credit score.

  1. Include Property Taxes and Home Insurance

For a more accurate monthly payment estimate, include expected property taxes and home insurance costs. You can typically find property tax information from local tax authorities and insurance estimates from insurance providers.

  1. Analyze the Results

Once you’ve input all the necessary information, the mortgage calculator will provide an estimated monthly payment. This figure includes principal and interest payments, and depending on the calculator, may also include property taxes and insurance.

  1. Experiment with Different Scenarios

Use the mortgage calculator to explore how changing various factors—such as a higher down payment, a lower interest rate, or a shorter mortgage term—could affect your monthly payment.

  1. Understand the Limitations

While mortgage calculators are helpful, remember they provide estimates based on the information you input. Your actual mortgage payment may vary due to factors like changes in interest rates, property taxes, and insurance costs.

  1. Consult with a Mortgage Broker

After using the mortgage calculator, consider consulting with a mortgage broker like Shelto. They can provide a more precise breakdown of your potential costs and guide you through the home buying process.

In conclusion, a mortgage calculator is a powerful tool for understanding what you can afford when buying a home. It can provide you with a clear picture of your potential costs and help you prepare for the home buying journey. However, it’s important to remember that a mortgage calculator provides estimates, and for a more accurate assessment, you should consult with a mortgage professional. At Shelto, our team of experienced brokers is ready to guide you through every step of the process.

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