Every mortgage calculator you run across on the internet is going to be slightly different – and they're not all created equal! Let's be honest: a calculator is a great way to get you to spend time on the website and it probably gets you excited for the possibilities around buying or refinancing your property. But you also want the calculator to provide you with an accurate idea of the size of mortgage you qualify for and what your payments will be. That all comes down to knowing what information you will need to enter.
1. Your Income
In most cases, you will want to use your gross annual income – that is, the amount of money you make in a year before taxes. You can combine the income from everyone who will be on title for your property purchase. Rental income is ok to include, as long as you declare it. This part can be fun to play around with as you look at different scenarios and combinations of income to let you find the home of your dreams.
2. Your Down Payment
These funds can come from your savings, as a gift from a family member, or as part of a government program like the Home Buyer's Plan that lets you withdraw funds from your RRSP or the BC HOME Partnership Loan that will match a first time buyer's down payment. Enter the full amount you expect to be able to put down on your home purchase.
3. The Interest Rate
This step is where things get a little bit tricky. If the calculator you're using is to find the maximum mortgage you will qualify for, you're going to want to use the benchmark rate (4.99% at time of writing) since that's what a broker or lender will use when looking at your file. However, if you want to know what your payments will be, you'd want to use a current contract rate to get a more accurate picture.
4. Mortgage Term
Many online calculators have a place for you to enter the mortgage term. The problem is that they often actually mean the amortization. If you have a down payment less than 20% of the purchase price – or a high-ratio mortgage – enter an amortization of 25 years. Otherwise, you can choose anything up to 30 years.
The final step is taking a logical look at the results from the calculator. If it sounds too good to be true, chances are it is!
We have calculators to help you in every stage of life: building up your savings, deciding whether to rent vs buy, finding your maximum mortgage amount, and planning for your retirement. If you're ready to take your calculations to the next level, why not set up a free consultation with one of our mortgage planners (aka a human calculator)? Call us toll-free at 1-855-590-6520 or visit us at 307 Goldstream Avenue during regular business hours. We can also arrange an appointment evenings or weekends to work with you.
Auxilium Mortgage Corporation is based in Victoria, BC and works with clients locally and across Canada. The Auxilium team has over 100 years of combined financial experience and access to dozens of lenders to help you meet your goals.
