General Mortgage Questions

A mortgage is a loan provided by a lender to help you purchase a home or property. The property itself serves as collateral for the loan, and you repay it in installments, which include principal and interest, over a set period.

The amount you can borrow depends on several factors, including your income, credit score, existing debts, and the size of your down payment. A mortgage pre-approval can help determine your borrowing capacity and give you a clearer picture of your home-buying budget.

• Fixed-rate mortgage: Your interest rate remains the same throughout the term, providing predictable payments.

• Variable-rate mortgage: Your interest rate fluctuates based on the prime lending rate, meaning your payments may change over time.

• Mortgage term: The length of time you are committed to a specific mortgage agreement (typically 1 to 5 years). After the term expires, you must renew or refinance your mortgage.

• Amortization period: The total length of time it takes to pay off your mortgage in full (usually 25 or 30 years).

A mortgage pre-approval is a process where a lender reviews your financial situation and determines how much you can borrow. It’s important because it:

✔️ Helps you set a realistic home-buying budget

✔️ Locks in an interest rate for up to 120 days (depending on the lender)

✔️ Shows sellers that you are a serious buyer

In Canada, the minimum down payment required depends on the home price:

• Homes under $500,000: Minimum 5% down payment

• Homes between $500,000 and $999,999: 5% on the first $500,000 and 10% on the remaining amount

• Homes $1 million or more: Minimum 20% down payment

Mortgage default insurance (e.g., CMHC insurance) is required if your down payment is less than 20%. It protects the lender in case you default on the loan but allows you to purchase a home with a smaller down payment.

Several factors impact your mortgage rate, including:

• Your credit score

• Your down payment amount

• The type of mortgage (fixed vs. variable)

• The current economy and Bank of Canada rate

• Your employment history and income

Yes, but depending on your mortgage type, you may face prepayment penalties. Many lenders allow extra payments through prepayment privileges, such as increasing monthly payments or making lump-sum payments each year.

If you miss a payment, your lender may charge a late fee, and it could negatively affect your credit score. If you are struggling with payments, it’s best to contact your lender immediately to discuss possible solutions.

Mortgage refinancing involves replacing your current mortgage with a new one, often to:

✔️ Secure a lower interest rate

✔️ Access home equity for renovations or debt consolidation

✔️ Change your mortgage term or type

When your mortgage term expires, you can:

• Renew your mortgage with your current lender

• Refinance with a new lender for better terms

• Pay off your mortgage if you have the funds

It’s a good idea to start reviewing your options a few months before your renewal date to ensure you get the best deal.

There are several programs designed to help first-time buyers:

• First-Time Home Buyer Incentive: A government shared-equity loan that lowers monthly payments.

• Home Buyers’ Plan (HBP): Allows you to withdraw up to $35,000 from your RRSP tax-free for a down payment.

• First-Time Home Buyers’ Tax Credit: A tax credit that provides up to $1,500 in tax relief.

Yes! Through the Home Buyers’ Plan (HBP), you can withdraw up to $35,000 (or $70,000 for a couple) from your RRSP tax-free to buy your first home. You must repay the amount within 15 years.

Yes, a real estate lawyer is required to finalize your home purchase. They handle the legal paperwork, ensure proper title transfer, and register your mortgage with the lender.

Here’s a simple step-by-step guide:

1️⃣ Check your credit score – A higher score helps secure better rates.

2️⃣ Determine your budget – Use a mortgage calculator or get pre-approved.

3️⃣ Compare mortgage options – Fixed vs. variable, term length, and lender offers.

4️⃣ Find a home and make an offer – Work with a realtor to negotiate the best deal.

5️⃣ Get final mortgage approval – Submit all required documents for lender approval.

6️⃣ Close the deal – Work with a lawyer to finalize the purchase and receive the keys!