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Mortgage Types


The hypothec:
Refundable at any time without penalty if it expects to pay promptly, otherwise it is advantageous not to use them because the interest rate is 1% higher.

The closed mortgage
Interest rates the lowest though this type of loan often leads to penalties for early repayment or lump. By combining a fixed rate, you always know your monthly payment.

The pre-approved mortgage
It allows to set the amount you can borrow and is usually granted for a period of two to three months. If the interest rate changes during this period, the financial institution provides you with the lowest rate, which allows you to search your home in peace.

The variable rate mortgage
Interest rate varies, so the monthly payments may increase or decrease. If lower interest rates are expected, this kind of mortgage can be advantageous.

The fixed rate mortgage
For a certain period, the rate is stable, therefore to be considered if an upcoming rise in interest rates is expected.

The high-ratio mortgage
This mortgage is for you if your down payment is between 5% and 25%. CMHC or another company will be asking to ensure the difference. In this case, an insurance premium will be added to your loan.


Payments:

Several ways to pay your mortgage: Monthly, fortnightly or even weekly. The more your payments are accelerated, the more you can reduce interest costs and make savings.


Example: You decide to pay $ 250 every week instead of $ 1 000 per month in mortgage payments. At the end of the year you will have paid $ 250 X 52 weeks = $ 13 000 instead of $ 1 000 X 12 months = $ 12 000. Imagine the savings on interest after several years



Amortization

Time required for the full repayment of the debt. Normally it is 10, 15, 20 or 25 years. If your budget allows it, choose a shorter amortization.

Example: by absorbing a $ 100 000 mortgage at 8% 20 years instead of 25 years, you are saving $ 30 200 in interest charges!



Term

The term is the time during which the interest rate is fixed and can vary from 3 months to 10 years. The term of the loan must be discussed again at maturity. In general, the interest rate is lower for a shorter term. A short term allows instant savings long term while you enjoy a secure budget by helping you avoid a possible increase in interest rates.


The mortgage

Before signing, carefully read the mortgage from the financial institution by monitoring the following:

The amount of the mortgage
Lot number and the name of the cadastre
Street Address

Identifying party lenders and borrowers;

Interest rate

Repayment terms (the loan term and amortization)

If applicable, the amount levied for the payment of taxes or life insurance and disability

If applicable, the amount charged by CMHC.

Also, a penalty clause can appear on the mortgage in case of discounts made before the due date, the penalty can range from three to six months of interest, as the term selected. Your mortgage must also include a transfer clause in case of moving to another house.



Home Insurance

The institution that lends you requires that you reach home insurance equal to or greater than the amount of your loan. Request a copy of your policy with your insurance company before going to your lawyer.

The evaluation

In general, the lender conducts a comprehensive assessment of the desired property, unless you have already assessed before negotiating the purchase price. This involves defining the characteristics of the house, and an analysis of recent comparable transactions and assess current market conditions.

Mortgage insurance

In Canada, financial institutions allocate a loan that does not exceed 75% of the value of the house. If the requested loan exceeds this amount, your loan must be insured by CMHC. This way, your loan may represent 90% to 95% of the value of the house. Consider premiums of 0.5% to 3.75% of total loan amount. Also, a subscription charge of $ 75 * if a valid assessment has been carried out otherwise an outlay of $ 235 * for the lender to evaluates the property.


The eligibility for this insurance *:

-The home must be the principal residence and be located in Canada;

-The housing costs (the amount borrowed, interest, property taxes and heating costs) and 50% of condominium fees if applicable, may not exceed 32% of your gross household income.

"Your percentage of total depreciation of the debt should not exceed 40% of your gross household income.


* Ask your lender or to CMHC to determine changes in price and conditions.