Mortgages: The Ins and Outs in Canada

Mortgages are a big loan to have, and when you have one; you feel great knowing you can afford a home and enjoy the luxuries of being a homeowner. However, how much do you know about your mortgage? What do you expect from it? What does it cover? Do you know what type of mortgage you have?

There are many things that go into a mortgage loan, and it is one of the biggest and most important loans that you can get of your life. You want to make the right, most informed decision for you, your financials, and your overall situation.

We’ve gathered the information you need to make that informed mortgage decision. You should choose the right mortgage and when you have some information on it; you can be sure to be someone who is making the right decision overall.

What to Consider When Choosing a Mortgage

When choosing a mortgage for yourself, you want to keep some things in mind for the best possible loan option for you. You will get a bunch of options and these options are completely up to you and what yu choose. You need to choose which options fit with your needs, and these include:

  • Mortgage principal amount 
  • Payment frequency
  • Amortization 

The term that you get is the amount of time that your contract is with the lender or the time you have to pay back the mortgage amount that you borrow. The terms range up to five years and as low as a few months. If you’re unable to pay the entire mortgage back in full at the end of the term, you will then have to renew your mortgage and do the entire process again. This can change the specifics of the loan.

The interest rate that you get, and the type of interest might change based on the economy and the market values, and any penalties you will have to pay based on any breaks in the mortgage agreement and contract, and how soon the new renewal will be.

How the Mortgage Amount & Payments are Calculated

Knowing how your amounts are calculated can give you an idea of how much you might be approved for, but also how much you might have to pay every month. How much you pay towards the purchase of the home is known as the principal amount.

This includes the purchase price of the home, minus the down payment that you put on the home, and the loan insurance that you have to have. This is generally when you have less than 20% to put down on the home. This protects the lender in the event that you’re unable to pay the loan back.

The length of time that you have to pay towards the loan is known as the amortization period. This is usually no longer than 25 years and it is the time it would take you to pay off the cost of the loan. This is also something that determines how much your mortgage payments are going to be.

Your interest rate is going to be something that is added to the amount of the principle you’re paying towards the loan. This is an amount that is calculated into the principle amount, and you would pay both in one monthly payment to the lender. The higher the interest rate, the higher the monthly payment is going to be.

Additionally, the length of your mortgage, cost of the home, interest rate, and credit history is all something that is going to change the payments you’re going to be making every month. This is something that you want to keep in mind when you are paying the monthly amount.

Optional Mortgage Features

There are optional mortgage features that you can choose from based on the type of mortgage you have and the extras you want. You can choose from these different features:

Cash Back

Some mortgages, when they close, will give you cash back from it. This provides you with the chance to buy furniture, so some remodeling, or other changes or additions to the new home. This is an optional feature that helps you get the home ready.

Home Equity Line of Credit

This is a secured form of credit that goes against the purchase price of the home. It is a line of credit that you can use for different aspects of the home or other big purchases. This is because it is a line of credit that you would borrow from and then pay back.

Shop for Different Lenders

You don’t want to go with just one lender. Make sure to shop for a few different ones. You want to find the right one for you, but also that provides the many specifications you feel comfortable with. Applying to these mortgages at the same time can reduce the chances of having your credit score drop too far below where it should be.

Once you find the right mortgage lender to work with, you will feel more confident and comfortable overall. You can feel like you’re moving forward and getting the best loan for your needs. Make sure you get the right loans for the right money. Shop for your Canadian mortgage today and find a lender that can provide you with the needs you are looking to obtain.

Even if you have less than perfect credit, our partners can help you obtain a great mortgage with easy approval. Apply here so that we can connect you with the best mortgage provider for your situation!

Frequently Asked Questions About Mortgages

What if I have a bad or poor credit score? Would I still be able to borrow?

Generally, you have to have a minimum credit score of 680 in order to qualify for the loan you’re looking to obtain. You want to make sure that you do a thorough check of your credit before applying to ensure that you meet minimum requirements and that everything on your credit history is taken care of.

Unfortunately, if your score is too low, they will not let you borrow from them.

Do I have to keep applying for the mortgage after my loan term ends?

Yes. This is something that you want to do but make sure that your credit stays the same, or gets higher because you might be able to get a better interest rate because of this.

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Smarter Loans Staff

The Smarter Loans Staff is made up of writers, researchers, journalists, business leaders and industry experts who carefully research, analyze and produce Canada's highest quality content when it comes to money matters, on behalf of Smarter Loans. While we cannot possibly name every person involved in the process, we collectively credit them as Smarter Loans Writing Staff. Our work has been featured in the Toronto Star, National Post and many other publications. Today, Smarter Loans is recognized in Canada as the go-to destination for financial education, and was named the "GPS of Fintech Lending" by the Toronto Star in 2019.