Mortgage Guide

Pre-Approved Mortgages
With a little information on mortgage types you will be ready to shop around for the best interest rate and mortgage that fits your individual needs. The most common types of mortgages are the Conventional Mortgage (which requires a 20% or higher down payment) and the High Ratio Mortgage (which could be 0% down payment). Obtaining pre-approval from your lending institution guarantees you a period (usually sixty to ninety days) over which you are guaranteed a loan of a pre-approved amount and interest rate. Pre-approval allows you to concentrate on finding your new home rather than on mortgage financing issues and gives you more freedom to shop.

Overseas Buyer
In most cases, an overseas buyer needs 30% of the property value for the down payment. A 20% down payment may also be made possible with full disclosure of their assets in their own country.

Closed Mortgage
A mortgage which cannot be fully paid out before expiry of its term without penalty. The interest rate is locked in for the entire term of the mortgage. Closed mortgages are usually for longer terms from six months to thirty-five years. With a closed mortgage, you usually get a lower interest rate than you would with a fixed-rate, open mortgage.

Open Mortgage
A mortgage which may be fully paid out before expiry of its term without penalty. The interest rate may be variable or it may be locked in for the entire term of the mortgage. Open mortgages are usually for short terms from six months to two years. With an open mortgage, you usually pay a higher interest rate than you would with a closed mortgage.

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Conventional Mortgage High Ratio Mortgage
Ideal for
  • Residential purchases up to 80% of appraised value.
  • Long term borrowing needs.
  • Purchases with high dollar values that require repayment over a longer term.
  • Home renovations.
  • Residential purchases over 80% of appraised value.
  • Consolidation of registered debts against a property.
  • Renovations to a property.
Lending value
  • Up to 80% of the lesser of the appraised value or the purchase price on residential real estate.
  • Up to 95% of the lesser of the appraised value or purchase price on residential real estate.
  • Insured by Canada Mortgage & Housing Corporation (CMHC) or GE Capital Mortgage Insurance Canada (GE) as required by the Bank Act.
Interest rate
options and terms
  • Open (6 months to 1 year)
  • Fixed (1year to 10 years)
  • Convertible on 6 months
  • Variable rate
  • Open (6 months to 1 year)
  • Fixed (1 year to 10 years)
  • Convertible on 6 months
  • CMHC minimum 6 month term for 95% financing
Amortization period
  • Up to 35 years, but increasing your payments from monthly to bi-weekly or from bi-weekly to weekly will shorten your actual amortization period and decrease the total interest you pay.
  • Up to 35 years, but increasing your payments from monthly to bi-weekly or from bi-weekly to weekly will shorten your actual amortization period and decrease the total interest you pay.



Canada Mortgage & Housing Corporation
Canada Mortgage & Housing Corporation (CMHC) is a crown corporation and the administrator of the National Housing Act for the Canadian federal government. CMHC designs programs to help Canadians in need to get adequate housing. Under Canadian law, certain lending institutions cannot provide first mortgage financing in excess of 80% of the purchase price or lending value of a home unless the mortgage is insured. An insurer of mortgage loans, such as CMHC, reduces risk to lenders that are loaning money to home buyers who are purchasing with less than 20% down payment. The application fee is $75 and, if accepted, a one-time premium must be paid (based on the loan to value ratio or amount of down payment). Below is a table of CMHC premiums. The CMHC premium can be paid as a lump sum or can be added to your mortgage loan.


Premium on Total Loan

Premium on Increase to Loan Amount for Portability and Refinance

Standard Premium

Self-Employed without 3rd Party Income Validation

Standard Premium

Self-Employed without 3rd Party Income Validation**

Up to and including 65%

0.50%

0.80%

0.50%

1.50%

Up to and including 75%

0.65%

1.00%

2.25%

2.60%

Up to and including 80%

1.00%

1.64%

2.75%

3.85%

Up to and including 85%

1.75%

2.90%

3.50%

5.50%

Up to and including 90%

2.00%

4.75%

4.25%*

7.00%*

Up to and including 95%

2.75%

N/A

4.25%*

*

90.01% to 95% —
Non-Traditional Down Payment***

2.90%

N/A

*

N/A


 


To qualify for CMHC mortgage loan insurance, your down payment must come from your own resources (either saved or a gift). Additionally, you must be buying or building a home in Canada that will become your principle residence.

What is Bridge Financing?

If your new home closes before the one you are selling, you'll probably need bridge financing. Here's how it works.

Bridge financing is used as temporary funds to cover the cost of your new home if the sale of your current home isn't complete by the time your new home's purchase is complete.

 

Lenders can utilize the equity in the current home without having to refinance it to get the equity for the mortgage on the new home.

 

How this can help?

 

If a seller has a firm offer but the closing date isn’t for example for 3 months, and they have purchased a new home which that seller wants to close in one month. This is a perfect situation to use bridge financing.

 

What the lenders can do is set up a new mortgage, using the equity from their existing home as a guarantee and close on the new property up to 90 days earlier than when they sell their property.

 

Best Residential Rates for Jan 22, 2014
 Mortgage Rates (Apr)
 

Best Rates (%)

Term       Rate
Prime      3.00%
1 Year     2.99%
2 Year     2.59%
3 Year     2.79% 
4 Year     3.09%
5 Year     3.09%

10Year    4.49%


Best Variable Rate starting as low as 2.50%  
 * some conditions do apply


Different mortgage brokers offer different rates depending on which lending institution they work with.  Please make sure you read all fine prints.    
 

Annual Percentage Rate (APR) is for a mortgage of $100,000 with monthly payments and a 25 year amortization.  APR assumes no fee(s) apply.  If we require you to obtain an appraisal, the appraisal fee would increase your APR.

 


Penalty calculators now available!

Want to know how much penalty you need to pay to cancel your mortgage? The follow are the links to some of lenders who have started this new Federal requirement:

TD
RBC
BMO
CIBC
HSBC
ING
Laurentian
Scotiabank

 

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