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.

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.

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.