Choosing the right mortgage
The basic features to consider when selecting a mortgage include:
Conventional or high-ratio
A conventional mortgage is a loan for no more than 75% of the
appraised value or purchase price of the property, whichever
is less. The remaining amount required for a purchase (25%)
comes from your resources and is referred to as the down payment.
If you have to borrow more than 75% of the money you need, you'll
be applying for what is called a high-ratio mortgage.
Here's how a high-ratio mortgage works:
You can purchase with $00 down payment if you have excellent
credit history or you must have at least a 5% down payment when
you buy a home. Any purchase where the down payment is between
0% and 24% is considered a high-ratio mortgage, and the mortgage
must be insured by the Canada Mortgage and Housing Corporation
(CMHC) or GE Capital Mortgage Insurance Company (GEMICO). The
insurer will charge a fee for this insurance. The amount of
the fee will depend on the amount you are borrowing and the
percentage of your own down payment. Typical fees range from
1.00% to 3.25% of the principal amount of your mortgage. This
amount can be paid up front or added to the principal portion
of your mortgage. A Mortgage Specialist can help you determine
the exact amount.
Fixed rate or variable rate
When you take out a fixed-rate mortgage, your interest rate
will not change throughout the entire term of your mortgage.
As a result, you'll always know exactly how much your payments
will be and how much of your mortgage will be paid off at the
end of your term. With a variable-rate mortgage, your rate will
be set in relation to TD Prime¹ at the beginning of each
month. In other words, it may vary from month to month. Historically,
variable-rate mortgages have tended to cost less than fixed-rate
mortgages when interest rates are fairly stable. When rates
change, your payment amount remains the same. However, the amount
that is applied toward interest and principal will change. If
interest rates drop, more of your mortgage payment is applied
to the principal balance owing. This can help you pay off your
mortgage faster.
Short term or long term
The term is the length of the current mortgage agreement. A
mortgage typically has a term of six months to 10 years. Usually,
the shorter the term, the lower the interest rate.
A short-term mortgage is usually for two years or less. A long-term
mortgage is generally for three years or more. Short-term mortgages
are appropriate for buyers who believe interest rates will drop
at renewal time. Long-term mortgages are suitable when current
rates are reasonable and borrowers want the security of budgeting
for the future. The key to choosing between short and long terms
is to feel comfortable with your mortgage payments. After a
term expires, the balance of the principal owing on the mortgage
can be repaid, or a new mortgage agreement can be established
at the then-current interest rates.
Open or Closed
Open mortgages can be paid off at any time without penalty
and are usually negotiated for very short terms.² They
are suited to homeowners who are planning to sell in the near
future or those who want the flexibility to make large, lump-sum
payments before maturity.
Closed mortgages are commitments for specific terms. If you
want to pay off the mortgage balance, you will need to wait
until the maturity date or pay a penalty.
Equity mortgage
For clients who are self-employed and are unable to qualified
for a mortgage due to insufficient salary earnings. This product
allows you to purchase a home or use the equity on your principal
residence or investment property to borrow up to 90% of the
appraised value of the subject property.
Private Mortgages
For clients that have been declined by major banks are able
to obtain 1st or 2nd mortgages through private lenders as an
alternative.
New Immigrant program
For applicants who are new to Canada who wish to purchase,
but don't have established credit history or employment status.
For further details contact us.
