Ontario Mortgage Amortization Calculator - How To Use Them Effectively

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.

by: Paul Mangion

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