Posted on: 05-10-09 13:18:15
Guys,
Questions about mortgage calculations.
I believe each bank has different way to calculate the mortgage payment. Am I right?
TD mortgage calculator: http://www.tdcanadatrust.com/mortgages/index.jsp (Right side)
For example, consider the mortgage rate 4.0 and mortgage amount 100000.
1052.05/month for 25 years repayment term).
881.61/month for 35 years repayment term).
How TD is calculating how much will go toward principal and how much wil go toward interest from each mortgage payment?
How does the calculation will be change when paying extra $5000 one time? [interest will be reduce from the same day?]
What will be the difference between 25 year repayment term (1052.05/month) and 35 years repayment term with 1052.05/month
where 1052.05 - 881.61 = 170.44 will be extra payment. (TD allows 15% of mortgage per year for extra payment)?
What are advantages/disadvantages of 35 years repayment term and paying extra?
Thanks
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Success is Never Ending and Failure is Never Final.
Quote:
Originally posted by meitsme
Guys,
Questions about mortgage calculations.
I believe each bank has different way to calculate the mortgage payment. Am I right?
TD mortgage calculator: http://www.tdcanadatrust.com/mortgages/index.jsp (Right side)
For example, consider the mortgage rate 4.0 and mortgage amount 100000.
1052.05/month for 25 years repayment term).
881.61/month for 35 years repayment term).
The payments you have calculated are for a mortgage amount of $200,000 and not for $100,000.
Quote:
Originally posted by meitsme
How TD is calculating how much will go toward principal and how much will go toward interest from each mortgage payment?
For fixed rate mortgages, the interest is compounded half yearly and is calculated Not in Advance, meaning if you have monthly payments, the bank will charge you interest on the balance after the month is over and form the mortgage payments first it would be applied to interest and then to mortgage balance. Depending on the interest amount, the remaining amount would go towards reducing your principal.
Quote:
Originally posted by meitsme
How does the calculation will be change when paying extra $5000 one time? [interest will be reduce from the same day?]
If you pay any amount extra that would be applied to the principal the same day and the next month the interest would be charged on the reduced amount. Generally, in order to keep things simple, the banks would apply the lump sum payments on the same day as they apply the mortgage payments.
Quote:
Originally posted by meitsme
What will be the difference between 25 year repayment term (1052.05/month) and 35 years repayment term with 1052.05/month
where 1052.05 - 881.61 = 170.44 will be extra payment. (TD allows 15% of mortgage per year for extra payment)?
You can ask them to calculate it for you. Any time you pay extra payment, they may send you a revised amortization schedule.
Quote:
Originally posted by meitsme
What are advantages/disadvantages of 35 years repayment term and paying extra?
Advantage : lower payment, more affordability.
Disadvantage : You take more time to pay down your mortgage and pay significantly extra in interest if you do not make lump sum or extra payments. By the way, if you chose 35 year term but pay the amount equal to the 25 year term, your mortgage would be paid in 25 years and you would be mortgage free 10 years earlier.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Thanks for valuable anaswers and yes, I did calculated mortgage for $200000. (my mistake)
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Success is Never Ending and Failure is Never Final.
