FAQs

A mortgage is a loan which is secured against a home or property. They are used to buy a property without paying the entire purchase price upfront. Certain repayment terms are agreed to, and the lender is able to foreclose on the property if these terms are not met.

Depending on the terms of your mortgage, you may be able to increase your regular payments or make a lump-sum payment without penalty. You may also be able to switch from monthly to weekly or biweekly payments, which can make the equivalent of one extra monthly payment per year.

Depending on the cost of your home and your individual circumstances, you may be able to qualify for a mortgage with a down payment as low as 5% of the purchase price.

The amortization period is the total amount of time that it will take to pay off the entire mortgage loan. The mortgage term is the length of time that you are committed to the conditions of a specific mortgage contract, such as interest rate. 

Your variable rate mortgage will usually be stated in relation to the prime rate. The prime rate is the reference point used by financial institutions to establish variable loans, and depends on the policy interest rate set by the Bank of Canada (though these two things are not the same). As the Prime rate goes up or down, so will your interest payments.

A fixed rate mortgage will have the same interest payments for the entire mortgage term, while the interest payments for a variable mortgage will change if the lender’s prime interest rate changes. 

An open mortgage offers you the option of increasing your mortgage payments (either by increasing regular payments or paying a lump sum) during the term of the mortgage, while closed mortgages do not allow you to pay an additional amount without incurring penalties. Closed mortgages are much more common, as they come with lower interest rates, and most borrowers do not require the flexibility of an open mortgage.

No. Although both are loans which use a property as collateral, a Home Equity Line of Credit (HELOC) is a form of revolving credit, which can be drawn from and repaid at will, up to a certain credit limit. Interest is only collected on the amount being used. Mortgages, on the other hand, have a more rigid repayment schedule, and usually cannot be paid off at will without facing penalties.

A pre-qualification is a quick, casual assessment, based on a borrower-provided financial information, which can give a rough estimate of the mortgage amount for which they may qualify. A pre-approval is a more formal process, which requires a borrower to submit supporting documentation, resulting in a more certain mortgage amount and (in the case of fixed-rate mortgages) a possible rate-hold. A pre-qualification is usually used when a borrower has just begun to look at purchasing a property, while a pre-approval is usually saved for when they are closer to an expected purchase.

If you have all your financial information available, you can complete a mortgage application within about 15 minutes. After this, it’s in the hands of the lender. Getting pre-approved for a mortgage can take anywhere from a few days to a couple of weeks. 

You should get pre-approved once you are ready to seriously consider purchasing a home, as the amount that you are approved for will often determine your budget. However, you do not want to get pre-approved too early, as your circumstances may change, and a locked-in rate will expire after 60-120 days.

Mortgage brokers use their industry knowledge and relationships with different lenders to shop around and ensure that you are getting the best mortgage possible. They are available to explain and support you through the entire mortgage process, and beyond. Mortgage brokers are also often paid by the lender, so they do all of this with no fee to you, the borrower.

Depending on individual circumstances, there may be tax benefits to buying a home or getting a mortgage. For instance, as a first-time homebuyer, you may qualify for the First Time Home Buyers’ Tax Credit. On the other hand, your mortgage interest may be tax deductible if you are using the property to generate income, either as a rental or as a space from which a business is run.