A mortgage is a loan, generally used to buy a property. How much you pay depends on how much you borrow (the principal), the loan’s interest rate, and how long you take to pay it back (the amortization period). Do not be afraid to negotiate interest rates and mortgage terms with different lenders. They are offering you a product and talking to more than one lender helps you make an informed decision.
 
 
WHAT TYPE OF MORTGAGE IS BEST FOR YOU?
 
• Fixed rate mortgages:
Your interest rate is locked in for a specified period called a term. Your payments stay the same for the mortgage’s term so you will not pay more if interest rates increase over time.
 
• Variable rate mortgages:
Rate of interest you pay may change if rates go up or down.
 
• Conventional mortgages:
Require a down payment of 20% or more of the property’s value. You are not required to get mortgage default insurance with a conventional mortgage.
 
• Closed mortgages:
The mortgage cannot be paid off early without paying a prepayment charge.
 
• Open mortgages:
A mortgage that can be paid off at any time during the term, without having to pay a charge. The interest rate for an open mortgage may be higher than for a closed mortgage with the same term.
 
 
MORTGAGE DEFAULT INSURANCE
 
When you buy a home with less than a 20% down payment, the mortgage needs to be insured against default. This type of insurance protects the mortgage lender in case you are not able to make your mortgage payments. It does not protect you.
 
 
ARE YOU PLANNING TO PURCHASE A PROPERTY WITH LESS THAN A 20% DOWN PAYMENT?
 
If yes, you require mortgage default insurance which generally adds 0.6% to 3.85% to the cost of the mortgage depending on the total amount borrowed. Mortgage default insurance enables you to purchase a home with a minimum down payment of 5% (10% for multi-unit dwellings) with interest rates comparable to those of a conventional mortgage. Major providers of mortgage default insurance include Canada Mortgage and Housing Corporation (CMHC), Genworth Canada, and Canada Guaranty Mortgage Insurance Company