How Much Will a $400,000 Mortgage Cost You - nesto.ca (2024)

Home prices and interest rates have significantly increased in recent years, making homeownership unaffordable for many Canadians. This higher cost has left Canadians ready to purchase a home but doubting their long-term affordability of committing to a mortgage.

If you’re considering a mortgage of $400,000, it’s essential to know what borrowing costs may look like each month and over the life of the loan. Our post will walk you through these considerations, answering questions about the cost of monthly repayments and how much interest you will pay on the mortgage based on various interest rate scenarios and amortization periods.

Key Takeaways

• The interest rate and amortization will determine your monthly payments on a $400,000 mortgage.
• Changes to interest rates and the amortization period will influence how much total interest is paid over the life of a $400,000 mortgage.
• A longer amortization means you will have smaller monthly mortgage payments but will pay more interest over the life of the mortgage.

Monthly Payments for a $400k Mortgage

Monthly payments on a $400,000 mortgage will depend on several factors, including your interest rate and the amortization.

A mortgage calculator like nesto’s can help you estimate payments based on these variables. Typically, your mortgage payment will comprise the principal amount and interest.

If you put down less than 20% as a down payment, your mortgage will include mortgage default insurance unless paid with cash, which is not added to your mortgage.

By paying for your mortgage insurance with cash, you can take advantage of the lower insured mortgage rates without amortizing it over the duration of your mortgage. Additionally, you have the option with most lenders to include property taxes as part of your mortgage payment, which will be collected and remitted on your behalf.

• For example, using nesto’s current 5-year fixed rate of 5.39%, your monthly payment on a $400K mortgage with a 25-year amortization would total around $2,416, while a 30-year amortization would be approximately $2,229. This lower amount is due to the principal being spread out over an extra 5 years, but keep in mind that you will pay more in interest-carrying costs the longer your amortization.

Note: Your payment may differ depending on the mortgage term, amortization, and payment frequency you select when you obtain your mortgage.

Where to Find the Best Rates on a $400k Mortgage

Securing the best interest rate on your mortgage can significantly affect your total monthly costs. A great place to start is to compare offerings from different banks and lenders. This can be done by visiting the various bank and lender websites, using online comparison tools like nesto’s comparison page, or consulting a mortgage expert directly.

Prime lenders (some of whom are A lenders) will often have the best rates to offer. However, you must meet the strict qualifying criteria of these lenders to obtain the best rates. Subprime lenders (B and private lenders) will often have higher rates when compared to prime lending. These lenders are typically better suited for those with more equity in the subject property, self-employed income, or needing help to meet the qualifying criteria of prime lending.

Private (also known as syndicate) lenders lend money directly to the borrower as investors and set their own terms, conditions, and rates for the mortgage. Interest rates tend to be higher than those of prime and subprime lenders, but they offer mortgages to those who require a non-income qualifying (NIQ) solution.

Remember that the lowest rates don’t always mean the best deal. Consider other features and benefits like prepayment options, porting privileges, and any restrictions that could see you incur a hefty penalty if you prepay or pay off your mortgage before the term ends.

Total Interest Paid on a $400k Mortgage

The total interest you’ll pay on a $400,000 mortgage over its lifetime can be considerable.

Using nesto’s current 5-year fixed rate of 5.39% and a 25-year amortization, you would pay approximately $101,123 in interest over a 5-year term. If you look at the full 25 years, assuming your interest rate never changes, that figure balloons to $324,804.

However, if you opt for a 30-year amortization to lower your monthly payments, you would pay approximately $102,730 in interest over the 5-year term and $402,364 over the entire 30 years, assuming your interest rate never changes.

How to Apply for a $400k Mortgage

The application process for a $400,000 mortgage with nesto typically involves the following steps:

1. Prepare Documents: Gather all the necessary documents, including proof of income, bank statements, and identification.
2. Find a mortgage lender: There are many sites that compare mortgages and lenders, or if you’re just ready to start saving time and money, visit https://www.nesto.ca/online-mortgages-brand/
3. Complete the application: An address for the property is not required unless your offer has been made or accepted. A prequalification can be obtained when the subject property is not confirmed. Include details from the MLS listing if you have found a property where your offer is accepted. A nesto sales development representative (SDR) may reach out to you at this point to help you with your application.
4. Book a meeting:An expert at nesto will speak to you to understand your financial situation and match it to the most suitable mortgage solution for your needs. After meeting with an expert, a nesto processor will be assigned to help you fully complete or update any documentation needed to take your application to the finish line.
5. Get approved: You’ll get firm or conditional approval for financing from nesto.
6. Provide additional documentation: Include anything missing, including your realtor and solicitor’s contact information. Your nesto processor will contact you to help you complete your mortgage application.
7. Receive instructions: Instructions are sent to your solicitor or notary.
8. Pay outstanding costs: Your notary or solicitor will confirm any outstanding closing costs, including your downpayment, land transfer taxes, title insurance/search/survey/land transfer office fees, and legal fees.
9. Sign on your mortgage: You’ll book an appointment to sign with your solicitor.
10. Get keys to your new home – You’ll receive the keys to your new home on your closing date.

Frequently Asked Questions

Final Thoughts

Understanding the full impact of a $400,000 mortgage, not only what you expect as monthly costs but also how much interest you will pay over the life of the loan, can help you realize the full implications and costs of taking on a mortgage.

Contact nesto’s mortgage experts today for the best rates for your mortgage strategy.

Why Choose nesto

At nesto, our commission-free mortgage experts, certified in multiple provinces, provide exceptional advice and service that exceeds industry standards. Our mortgage experts are non-commissioned salaried employees who provide impartial guidance on mortgage options tailored to your needs and are evaluated based on client satisfaction and advice quality. nesto aims to transform the mortgage industry by providing honest advice and competitive rates using a 100% fully digital, transparent, seamless process.

nesto is on a mission to offer a positive, empowering and transparent property financing experience – simplified from start to finish.

Contact our licensed and knowledgeable mortgage experts to find your best mortgage rate in Canada.

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