Because Canadian mortgages differ from American mortgages in several significant ways, it is important for Canadian borrowers to price home loans using online mortgage calculators tailored to Canadian mortgages. Online mortgage calculators enable borrowers to determine monthly payments based on different purchase prices, down payments and interest rates. Most calculators also allow for working backward, meaning a borrower can start with a desired monthly payment and, from there, figure out the purchase price he can afford.
Canadian Mortgage Features
Two big differences exist between Canadian and American mortgages. While 30-year fixed mortgages reign supreme in the United States, they are virtually nonexistent in Canada. Instead, borrowers in Canada take out five-year mortgages that are amortized on 25-year schedules. Because the loan is nowhere near paid off at the end of the term, the borrower must refinance and absorb any rate increases that occurred in the interim. If the rate happens to decrease, oppressive prepayment penalties prevent borrowers from taking advantage by accelerating payments.
Unlike American mortgages, home loans in Canada are portable. If a borrower moves during the middle of his five-year term, he can simply apply his loan to his new home. If the new home costs more than the proceeds from the old home, he can borrow additional funds to cover the difference. The best online payment calculators for Canadian mortgages are offered by TD Canada Trust, CanadaMortgage.com, and the Financial Post.
TD Canada Trust
The mortgage calculator on the TD Canada Trust website is simple, yet it provides everything a borrower needs to calculate his payment based on his mortgage amount, interest rate, payment frequency and amortization schedule, which is usually 25 years.
Like most mortgage lenders in Canada, TD Canada Trust offers several payment options. Borrowers can make standard monthly payments, or pay weekly or biweekly. If a borrower chooses one of the more frequent payment options, he has the choice to accelerate his mortgage. An accelerated biweekly payment is half a monthly payment made every two weeks so the borrower makes 26 half-payments, or the equivalent of 13 whole payments, per year. A borrower who pays biweekly but does not accelerate takes the sum of 12 monthly payments and pays 1/26 of that amount every two weeks; he, therefore, makes only 12 full payments per year. The website's online mortgage calculator lets borrowers play with these different payment options and compare payment amounts for each.
The calculator at CanadaMortgage.com is formatted differently from the one at TD Canada Trust, but its features are similar. Borrowers choose a term length, amortization schedule, loan amount, interest rate and payment frequency. In addition to the payment frequency options covered above, this calculator includes annual and semi-annual payments. Some Canadian lenders allow borrowers to pay only once or twice per year.
This calculator also offers an option for additional payments to be made monthly or yearly; however, it does not appear to consider any prepayment penalty that may apply for making such payments. Prepayment penalties almost always apply to Canadian mortgages, and borrowers should understand the terms of their loans before planning to make extra payments.
The Financial Post
The Financial Post mortgage calculator features a simple layout and ease of use. Borrowers enter a loan amount, interest rate and amortization period, and choose between monthly, weekly, accelerated weekly, biweekly and accelerated biweekly payment frequencies. There is an option to include an additional yearly lump sum payment but, again, borrowers should consult their mortgage terms for any prepayment penalties before making such arrangements. This calculator also displays the latest prevailing mortgage rates in Canada, which borrowers can use as a guide when pricing mortgage scenarios.