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Understanding Your TD Mortgage Payment

About Mortgage Amount

The mortgage amount is the total sum you need to borrow from the lender to purchase your home. This is calculated by subtracting your down payment from the home's purchase price. In Canada, if your down payment is less than 20% of the home's value, you'll need mortgage default insurance (CMHC, Sagen, or Canada Guaranty), which protects the lender and adds to your borrowing costs.

About Term and Interest Rate

The mortgage term is the length of time your mortgage agreement and interest rate remain in effect. Terms typically range from 1 to 5 years, though longer terms are available. At the end of each term, you'll need to renew your mortgage, potentially at a different rate. The interest rate determines how much you'll pay to borrow the money.

• Fixed Rate: Your interest rate stays the same throughout the entire term, providing payment stability and predictability.
• Variable Rate: Your interest rate fluctuates with the Bank of Canada's prime rate, which can result in lower costs when rates drop but higher payments when rates rise.

About Amortization Period

The amortization period is the total length of time it will take to pay off your entire mortgage. In Canada, the maximum amortization period is typically 25 years for mortgages with less than 20% down payment, and up to 30 years for those with 20% or more down. A longer amortization period means lower monthly payments but significantly more interest paid over the life of the mortgage.

• Shorter Amortization (15-20 years): Higher monthly payments but substantial interest savings over time
• Longer Amortization (25-30 years): Lower monthly payments but considerably more interest paid overall

About Payment Frequency

Payment frequency determines how often you make mortgage payments. Different frequencies can significantly impact the total interest you pay and how quickly you build equity:

• Monthly: 12 payments per year, standard option with predictable monthly budgeting
• Semi-monthly: 24 payments per year (twice per month), aligns well with bi-weekly paychecks
• Bi-weekly: 26 payments per year (every two weeks), results in one extra monthly payment annually
• Weekly: 52 payments per year, even more frequent payment schedule
• Accelerated Bi-weekly: Takes monthly payment, divides by two, paid every two weeks - creates extra payment per year
• Accelerated Weekly: Takes monthly payment, divides by four, paid weekly - maximizes interest savings

Tip: Accelerated payment frequencies can help you pay off your mortgage faster and save thousands in interest, as you're essentially making one extra monthly payment per year.

Key Canadian Mortgage Considerations

• Mortgage Stress Test: Canadian regulations require you to qualify at either your contracted rate plus 2% or the Bank of Canada's benchmark rate, whichever is higher, ensuring you can afford payments if rates increase.
• Prepayment Privileges: TD Bank typically offers prepayment options allowing you to pay extra toward your principal without penalty, helping you save on interest and pay off your mortgage faster.
• Portability: Many TD mortgages are portable, meaning you can transfer your existing mortgage to a new property, potentially saving you from breaking your mortgage and paying penalties.
• Closing Costs: Budget an additional 1.5-4% of the purchase price for land transfer taxes, legal fees, home inspections, appraisals, and title insurance.

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