How Much Will Your Mortgage Payments Be?
Before you start the house-hunting process, you'll want to crunch the numbers. This will help you determine how much you can afford in monthly mortgage payments, and what you would need in terms of a down payment and interest rate in order to qualify for a mortgage that fits your budget.
So, how much can you expect to pay in mortgage payments every month?
Home Prices And Mortgage Rates Increase in June
According to the Toronto Regional Real Estate Board's (TRREB) latest market watch report from June 2023, mortgage rates and home prices have risen in most cases as follows:
Mortgage rates:
1 Year - 7.14%
3 Year - 6.54%
5 Year - 6.49%
Average home price based on home type:
Detached: $1,785,128 - up 2.6% from May 2023
Semi: $1,408,550 - up 4.9% from May 2023
Townhouse: $1,033,432 - up 0.7% from May 2023
Condo: $770,423 - down 0.2% from May 2023
Using these figures, you can get an idea of what your mortgage payments could potentially look like.
How Much Will Your Mortgage Payments Be?
The amount you pay every month in mortgage payments will depend on a few key factors, including the following:
Home price
Down payment
Mortgage rate
Amortization period
Term length
Let's use a few examples with varying figures to help you get an idea of what your mortgage payments could look like. Each example is based on the average home price for a detached, semi, townhouse, and condo:
Example 1:
Home price: $1,785,128
Down payment: 20% ($357,025.60)
Amortization period: 25 years
Mortgage interest rate: 6.49%
Term: 5 years
Monthly mortgage payment: $9,557.11
Example 2:
Home price: $1,408,550
Down payment: 15% ($211,282.50)
Amortization period: 25 years
Mortgage interest rate: 6.54%
Term: 3 years
Monthly mortgage payment: $8,048.64
Example 3:
Home price: $1,033,432
Down payment: 10% ($103,343.20)
Amortization period: 25 years
Mortgage interest rate: 6.54%
Term: 3 years
Monthly mortgage payment: $6,252.53
Example 4:
Home price: $770,423
Down payment: 5% ($38,521.15)
Amortization period: 25 years
Mortgage interest rate: 7.14%
Term: 1 year
Monthly mortgage payment: $5,189.78
As you can see, mortgage payments based on soaring home prices are not cheap. That said, there are some ways to keep your mortgage payments lower, including the following:
Make a bigger down payment
Opt for a 5-year term to get a lower rate
Extend the loan amortization period
Taking these tips into account, let's compare the mortgage payments you could make by putting more down upfront and opting for a longer loan term using the same home prices as the above examples:
Example 1:
Home price: $1,785,128
Down payment: 35% ($624,794.80)
Amortization period: 25 years
Mortgage interest rate: 6.49%
Term: 5 years
Monthly mortgage payment: $7,765.16
Example 2:
Home price: $1,408,550
Down payment: 25% ($352,137.50)
Amortization period: 25 years
Mortgage interest rate: 6.49%
Term: 5 years
Monthly mortgage payment: $7,069.70
Example 3:
Home price: $1,033,432
Down payment: 25% ($258,358)
Amortization period: 25 years
Mortgage interest rate: 6.49%
Term: 5 years
Monthly mortgage payment: $5,186.93
Example 4:
Home price: $770,423
Down payment: 15% ($115,563.45)
Amortization period: 25 years
Mortgage interest rate: 6.49%
Term: 5 years
Monthly mortgage payment: $4,382.44
Just tweaking these figures can drastically reduce your monthly mortgage payments. But that may be easier said than done, particularly when it comes to gathering a substantial down payment.
Before you start your search for a new home, make sure you sit down with a mortgage specialist, who will review your financial status and help you determine what you can afford. From there, you can establish a monthly mortgage payment you can comfortably handle, which will determine the price range of homes you can look at.
When you're ready to take the plunge into homeownership, we're ready to help. Reach out to The Lotus Group today!