The purchase of a home is one of the biggest decisions and significant financial investments a consumer makes. It is extremely important that you do your research and educate yourself on key mortgage terms in order to make an informed decision about what mortgage product is best for you.

Different consumers are at different stages in their lives. They have different mortgage needs and there are many mortgage products to choose from. The best result will occur when you work with a mortgage professional, who can offer sound, professional advice and a mortgage solution that matches your needs and circumstances. Above all, you need to be comfortable with your mortgage choice.

Pre-Approval

It is important to obtain a pre-approval for the amount of money you can borrow from a lender and avoid looking at homes that may be out of your price range. The pre-approval process is usually guaranteed for a period of 90 days (and sometimes up to 120 days). For additional security for the lender, you may want to have a co-signer – a party who signs the mortgage documents along with the borrower, but who does not have any interest in the ownership of the property.

What is a Mortgage?

Few people can come up with the entire amount of money required to pay for the cost of a home. A mortgage is a loan of the money most people require to finance the purchase their home. A mortgage allows individuals to buy property without paying the full value all at once. The mortgagor is the person borrowing money, the mortgagee is the lender of the money.

When negotiating the amount of your mortgage, you should be aware that you will be required to provide a down payment which is the money you put towards the purchase price of your home. The amount of your mortgage is determined by the purchase price of the home less the amount of your down payment. As with all loans, a mortgage must be repaid to the borrower with interest. There are different types of repayment methods which make up the different kinds of mortgages available.

Like all loans, regular payments made over time go towards paying down the mortgage. These payments are made up of two parts – one part goes towards paying the principal (the amount of money borrowed) and other part goes towards paying the interest (the fee charged for borrowing the money.)

The more money you can put down, the less you will have to borrow, and the less interest you will have to pay over the length of the mortgage.

If you have a down payment equivalent to 20% or more of the purchase price, you will have what is called a conventional mortgage.

If your down payment is less than 20% of the purchase price, you will have what is called a high ratio mortgage. A high ratio mortgage must be insured to protect the lender. This insurance is called mortgage default insurance. It protects the lender in case the borrower isn’t able to repay the loan.

Canada Mortgage and Housing Corporation (CMHC), Genworth Financial and AIG United Guaranty offer assistance to home buyers who do not have a lot of disposable funds for a down payment.

Ask Stan Shawn to recommend an excellent mortgage professional.

What is a Mortgage

Terms and Rates

Mortgage Types

Closing Terms and Costs

Paying Off Your Mortgage Sooner

Types of Homes

Finalizing Your Mortgage

 

(source: Canadian Association of Accredited Mortgage Professionals)