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You have decided to buy a property or refinance an existing property that you own.
What you now have to decide is your mortgage amount, the length of mortgage contract that you want with your lender (TERM) and how long you think it will take to pay off your mortgage amount (AMORTIZATION).
Your Realtor or mortgage broker will provide you with the current interest rates (STATED ANNUAL RATES) which are based on the TERM that you select.
EXAMPLE:
You have determined that you will need to arrange a $ 127,500.00
First Mortgage.
The TERM that you have decided upon is the 5 year TERM which is being offered at 4.34% ( the STATED ANNUAL RATE ).
Your Realtor or mortgage broker has explained to you that the longer the period of time it takes to repay a mortgage the more interest you will pay and vice versa. Knowing the monthly principal and interest payment that you feel comfortable paying will assist you in determining what your appropriate AMORTIZATION should be.
At this point you should determine a mortgage payment based on a variety of AMORTIZATIONS.
So, calculate Monthly Mortgage Payments for the following Amortizations:
1. 25 YEARS
2. 20 YEARS
3. 15 YEARS
Answers:
1. $ 694.38
2. $ 793.02
3. $ 962.47
Note: A little known fact. Regarding the example above, if you qualify and feel comfortable about making a monthly principal and interest payment of say $ 875.00 ( what KGM Canadian Mortgage Calculators refers to as a PREFERRED payment) then feel free to do so. Your lender will be able to calculate the applicable AMORTIZATION. To calculated the adjusted AMORTIZATION yourself run the numbers on our COMPARISON CALCULATOR. Answer: 17.968 years.