Financing

Financing is one of the most important parts of the buying process and it may have a number of definitions you may not be familiar with. Here are some basic terms that will help you to make the right decisions.


Mortgage term: It’s the period of time you choose in which the options you select for your mortgage will be in effect. You can choose a maximum of a 10-year term and after that, you can renegotiate your mortgage options for your next term.

Amortization Period: It is the time you take to pay off the full amount of the mortgage. It's usually 25 years.

Types of Interest Rates: Fixed-rate - The interest rate does not change for the mortgage term. Variable-rate - The interest rate of your mortgage will fluctuate based on the market rates.

Open Mortgage: You can either pay the full mortgage or some part of the mortgage at any time. However, the interest rates are higher in an open mortgage.

Closed Mortgage: You can not pay your mortgage early without a penalty.

Conventional: When the down payment is 20% or more of the property value. In this case mortgage default insurance premium is not required.

High Ratio Mortgage: When the down payment is less than 20% of the value of the property. In this case mortgage default insurance premium is required.

Mortgage Loan Insurance: Mortgage loan insurance protects lenders in case you are not able to make payments. When your down payment is less than 20% of the value of your property, it is a high ratio or high-risk mortgage and in that case, you will pay mortgage default loan insurance which will be added to your mortgage amount. This allows you to purchase a property with a minimum down payment of 5%. Mortgage default insurance is provided by Canada Mortgage and Housing Corporation (CMHC), Sagen, Canada Guaranty Mortgage Insurance Company.

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