For many property seekers, financing is an essential aspect to their successful purchase. In fact, before starting the search, all Home Buyers should ensure they qualify for their desired amount of mortgage through a Pre-approval with a Mortgage Advisor.

What is a mortgage, anyway? A mortgage, in simplified terms, is a legal agreement in which a bank or creditor lends money to an individual/entity with interest. They mortgager in return holds the right to the title of the mortgagee’s property until the debt has been paid, or a different arrangement has been agreed upon.

When taking out a mortgage, the Lender generally will require a Down Payment – a percentage of the purchase price the mortgagee must put down first to demonstrate some financial stability. In Canada, the minimum down payment to put down is 20%. If less, the mortgage loan will have to be insured by CMHC, which in return will increase payment fees.

The right mortgage for each individual will vary depending on their situation – thus, it is important to work with a knowledgeable mortgage broker to find the best option for you.

When picking a mortgage, there are several different factors to consider, or ‘shop’ around for:

  • Mortgage rates
    • These rates may vary from each financial institute. There may also be specific programs that individuals can qualify under, offering them better rates or different incentives.
  • Amortization period
    • The length of time it will take to pay off your mortgage, generally 25 or 30 years
    • The shorter the Amortization period, the higher each monthly payment becomes, but it will also allow for more savings in interest paid over time
  • Fixed Rates vs Variable Rates
    • Fixed Rates: A mortgage in which the interest rate is fixed for the term chosen. There is less ambiguity in potential changes in interest payment, thus Owners are able to stay in budget.
    • Variable Rates: A mortgage in which the interest rate is adjusted accordingly to market conditions. Rates are typically lower than Fixed Rates, but also they include a higher risk in that interest rates can increase or decrease without warning.
  • Potential for early payments
    • Each plan may offer different incentives and penalties should the Owner wishes to change their payment plans – this may be an important factor to consider for some individuals.
  • Penalties for ending Mortgage Term early
    • It is not unusual for home owners to sell their properties prior to the completion of their mortgage term. There are generally options to port the mortgage should the individual purchases a different property within the bank’s allotted time frame, but for those who are completely letting go of their mortgage post-sale, there will be a penalty.

These are a few of the main factors to consider when shopping around for the right mortgage. Our highly experienced mortgage team at Ohm Property will help first time mortgagees walk through a seamless process; those with a strong knowledge base on the mortgage process can enjoy working with competitive rates with our qualified mortgage brokers.