What is the monthly payment on a \$1,000,000 mortgage?

Learn about the monthly payment and interest payments on a \$1,000,000 mortgage in Canada.

Last updated: May 14, 2023

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When it comes to homeownership, one of the first questions you ask yourself is if you can afford it. Find out what your monthly payment and total interest would be, as well as what income is required to carry a \$1,000,000 mortgage. You can also use a mortgage affordability calculator to get an estimate of how much you can afford. These calculations are just examples and we recommend you work with a mortgage advisor to get the most accurate numbers for your situation.

How much would my monthly payments be on a \$1,000,000 mortgage?

If you have a down payment of \$300,000 and a property value of \$1,300,000, your monthly mortgage payment on a 25 year amortization mortgage at a 3.50% fixed interest rate, would be \$4,993 a month and a 10 year amortization will cost approximately \$9,877 a month.

Your monthly mortgage payments will differ depending on the type of interest rate (fixed or variable), your mortgage term, payment frequency, property taxes and other possible fees.

Here is the monthly payments and interest payments based on a \$1,000,000 25-year mortgage at different rates.

How much interest would I pay on a \$1,000,000 mortgage?

If you have a down payment of \$300,000 and a property value of \$1,300,000, you will pay approximately \$501,870.17 in interest over the life of your 25 year amortization mortgage with a 3.50% fixed interest rate, which is 50% of your total mortgage principal. You can minimize the amount of mortgage interest you pay by prepaying your mortgage principal.

If you go with a 10 year amortization, you will pay approximately \$186,130.41 in interest over the life of your mortgage, which equates to 19% of your total mortgage principal.

How do I calculate how much income would I need to make for a \$1,000,000 mortgage?

The first step to your homeownership journey is getting a mortgage pre-approval, which will generally tell you the maximum mortgage amount you can afford. However, it doesnâ€™t guarantee that you will get that amount. Your mortgage lender will take into account your credit score, income, monthly expenses, debt, your down payment (the larger the down payment, the less you need to borrow) and other savings you might have. This will help them calculate your debt-to-income ratios and determine how much mortgage you can afford.

To determine whether you can afford a home will depend on a variety of factors, such as your debt service ratios, passing the mortgage stress test and whether you will need mortgage default insurance.

Maximum limits

The maximum Gross Debt Service Ratio (GDS) limit used by most lenders to qualify borrowers is 39% and the maximum Total Debt Service (TDS) limit is 44%.

1. The first step is to calculate your Gross Debt Service Ratio. Your total monthly housing expenses such as mortgage payments, utility bills, property taxes, etc. will be evaluated against your monthly income. Your monthly expenses should not exceed 39% of your gross income.

Annual Income Ã· 12 = Monthly Income
Monthly Income x 0.39 = Maximum Gross Debt Service

For example, if you make \$1,000,000 a year

\$1,000,000 Ã· 12 = \$83,333 monthly income
\$8,333 x 0.39 = \$32,500 is the max of what your monthly expenses should be

2. The next step is to consider any debts you might have which includes student loans, lines of credit, car payments, credit cards, child or spousal support payments. This Total Debt Service amount should not exceed 44% of your gross income.

Monthly income x 0.44 = Total debt service
\$1,000,000 x 0.44 = \$440,000 is the max of what your total debts should be

Mortgage stress test

The stress test will help you determine your mortgage affordability and to ensure that you can still afford your mortgage payments if interest rates rise. Homebuyers must qualify for a mortgage at the current benchmark rate of 5.25% or your current or target interest rate plus 2%, whichever amount is larger.

Down payment

You can also use your down payment as a benchmark to determine your maximum affordability.

If your down payment is \$25,000 or less, you can find your maximum purchase price using this formula:

Down payment Ã· 5% = Maximum Affordability

For example:

\$25,000 Ã· 5% = \$500,000 maximum affordability

If your down payment is \$25,001 or more, you can find your maximum purchase price using this formula:

(Down Payment Amount – \$25,000) Ã· 10% + \$500,000 = Maximum Affordability

For example:

If you have \$100,000 for your down payment.

(\$100,000 – \$25,000) Ã· 10% + \$500,000 = \$1,250,000 is your maximum affordability.

If you have a mortgage with less than a 20% down payment you will be required to purchase mortgage default insurance, often referred to as CMHC insurance.

Mortgage Default insurance

If you have less than 20% down payment, you will need mortgage default insurance. The premium is based on the loan-to-value ratio (mortgage loan amount divided by the purchase price). The premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments. The exact premium will be calculated when you apply for a mortgage and provincial sales tax may apply.

Here is a general idea of the premiums charged by CMHC.

Up to and including 65% 0.60%
Up to and including 75% 1.70%
Up to and including 80% 2.40%
Up to and including 85% 2.80%
Up to and including 90% 3.10%
Up to and including 95% Traditional Down Payment 4.00%

Taking into account everything listed above, it can seem very overwhelming. Itâ€™s best to work with a mortgage advisor to make sure the calculations are done correctly so you know exactly how much you can afford and how much you need to be making in order to get a \$1,000,000 mortgage

Alex Leduc

Alex Leduc is Founder and CEO at Perch. Prior to starting Perch, he worked in the real estate sector for 8 years in corporate finance, strategy and analytics roles. He is currently a Technical Advisory Committee Member of the Financial Services Regulatory Authority of Ontario (FSRA) and Co-Chair of the Canadian Lenders Association Mortgage Roundtable. Alex is a graduate of Ivey Business School from Western University and a CFA Charterholder. LinkedIn