There are three basic kinds of mortgage loans:
- Conventional Mortgage: This is where you have 20% or more of the purchase price to put down by the time you take possession (the down payment). This is the best deal for buyers.
- Insured Mortgage: Here you have at least 5% to put down, but not 20%. You need repayment insurance for this kind of mortgage and so it costs a little more.
- Non-Resident Mortgage: This is where the buyer is not a Canadian nor a landed immigrant. In this case you will likely need to put at least 40% down to get a mortgage.
- Most buyers arrange a mortgage at the time they sign the Contract and get an offer letter from a bank or credit union, we can help with this.
- Many buyers start with a 25 year mortgage to keep payments low, and then change it to a 15 or 20 year mortgage after 5 years when they can afford larger payments.
- You need to show income to qualify for a mortgage, unless you put at least 50% down. Other debt will reduce how much you can borrow, such as vehicles purchased on credit.
We have people who can help you get a good mortgage. To help you understand the process, please read this summary…For a very rough estimate of how big a mortgage you can qualify for, take your total household annual income before deductions (you and your spouse/partner) and multiply by five. For example if your household income before deductions is $60,000 then you likely qualify for a mortgage of about $300,000.
- If you have trouble qualifying for a mortgage many people ask a relative or close friend to co-sign the mortgage, which means they agree to pay if you don’t! Also, if your down-payment is 20% or more of the price, many mortgage rules can be flexible.
- Most buyers prefer a “fixed mortgage” where the interest rate and payment amount is fixed for a certain number of years (usually 5 years). This is easier to qualify for. Some buyers prefer a rate based on the bank’s Prime Rate which can go up and down, called a “variable rate” mortgage. Variable rate mortgages require more income to qualify for.
- Make sure you use the price including the GST when you are dealing with the bank so you do not need to provide the GST money when you take possession.
- You can get life insurance on your mortgage if you want to. This is optional, and can be an expensive way to buy life insurance.