The Greater Toronto Area real estate market has continued to boom. According to the Toronto Real Estate Board, 2014 sales were up by 6.7%, with the average house price rising by 8.4% from the previous year to $556,602. This is great news for residents who were either savvy or just plain lucky enough to enter the market when homes were more affordable. Many homeowners now have considerable equity that they can use to meet new financial goals, or perhaps they want to refinance their mortgages for more favourable terms.  It’s time to get out that mortgage calculator again, Toronto residents!

 

 

Mortgage calculators allow potential homeowners to accurately crunch numbers before going too far into the process, showing the financial implications of various decisions. Many variables lead to a viable payment schedule. Considerations are interest rates, payment schedule (monthly, bi-monthly), down payment, closing costs and amortization (how long it will take to pay the mortgage off in full).  While mortgage calculators are an important tool for first time owners they also help current homeowners consider other options.

 

Refinancing involves paying off an existing mortgage in exchange for a new mortgage. There are a variety of reasons that make sense to refinance a mortgage. Perhaps you want a better rate of interest. Perhaps you’ve inherited some money and want to significantly pay down the principal. Perhaps your financial circumstances have changed and you want to have lower payments; this can be done by increasing the amortization period. Note that any increase in the amortization period will lead to paying considerably more in interest.

 

A great way to see if the refinancing option makes financial sense is to crunch the numbers with a mortgage calculator designed for refinancing. This will allow you to compare the original mortgage terms with a new one, taking into account closing costs and penalties.

 

 

Another financial option is taking out a second mortgage. A second mortgage is similar to a first mortgage, with fixed payments based on the amortization period. Second mortgages usually have a higher rate of interest than a first mortgage. They can be useful when you need a lump sum loan and want to pay it off with fixed interest rates. To see if a second mortgage works for you, check out the numbers with a mortgage calculator that allows you to compare terms.

 

 

A calculator can also help you determine how much equity you have in your home (the value of a home minus the outstanding mortgage). That equity can allow homeowners obtain a loan at a much lower rate as the loan is secured.

 

 

Although crunching numbers with a mortgage calculator can help Toronto homeowners get an accurate picture of the financial implications of various scenarios before getting too far into the process, it’s always wise to seek out a reputable mortgage specialist to see what works best for your economic situation. If you are intimidated by the big banks, look for an independent lender. Many private lenders have more flexibility, helping you find a plan that is right for your financial goals.