# How does a home loan simulator work?

At a time when the Internet is at the heart of daily life, most real estate professionals offer credit simulators to allow future buyers to base their thinking. Using these tools, it is possible to determine the first outlines of the financial envelope available for the purchase of real estate. Better still, it allows you to understand the calculation mechanisms to optimize your financing plan.

## What are the different simulators available?

### Calculation of monthly payments

By entering the amount borrowed, the duration of the loan and the target rate (excluding insurance), it is possible to obtain a monthly payment indicative of the mortgage.

For example, for a loan of USD 200,000:

• over 10 years at a rate of 1%, the monthly payment would be USD 1,752.08 for a total cost (excluding insurance) of USD 210,249.60
• over 20 years at 1.5%, it would be USD 965.09 for a total cost (excluding insurance) of USD 231,621.60
• over 25 years at 1.70%, it would be USD 818.80 for a total cost (excluding insurance) of USD 245,640

Depending on the duration of the loan, the total cost of the loan can vary from USD 210,249.60 to USD 245,640

Remember: The longer the repayment period, the lower the amount of the monthly payments, but the more the total cost of the credit will increase. Besides this indicative monthly payment, it will be necessary to add the cost of insurance.

### Calculation of borrowing capacity

By entering the desired monthly payment, the duration of the loan and the target rate, it is possible to assess the borrowing capacity (in other words, the amount to borrow). Please note, this amount may not exceed 33% of the total amount of your income (see debt ratio).

For example, based on a monthly income of USD 2,800 and the application of the 33% rule:

• with a monthly payment of 925 USD over 10 years at a rate of 1%, the loan amount can be 105,589 USD
• with a monthly payment of USD 925 over 20 years at a rate of 1.5%, the loan amount can be USD 191,692
• with a monthly payment of USD 925 over 25 years at a rate of 1.7%, the loan amount can be USD 225,940

Depending on the duration of the loan, the amount can change from 105,589 USD to 225,940 USD

Keep in mind: The longer the repayment period, the greater the borrowing capacity (but more, mechanically, the total cost of credit will increase).

### Calculation of notary fees

By entering the nature of your project, the price of land, housing, the cost of additional work and the amount to borrow, it is possible to estimate the amount of notary fees, so that they can be included in the credit.

Note that these costs correspond to taxes and levies, fees, expenses and disbursements as well as the notary’s remuneration.

For example, for the purchase of old housing at USD 200,000, the notary fees are assessed at 15,580, or 7.79% of the real estate project.

To remember: For an old home, these acquisition costs are around 8% of the sale price, while they are 2 to 3% for a new home.

All these calculators allow you to better “frame” your real estate project. Naturally, these are indicators, built on trends and averages – which slightly limits their scope. Better to rely on the good care of a broker, mortgage expert: download our free white paper and discover the advantages of this professional for building an optimized financing plan!