Understanding the Canadian Mortgage Process: What Home Buyers Need to Know
Posted by Justin Havre on Friday, October 6th, 2017 at 8:01am.
Navigating the mortgage market successfully can be just as difficult as finding the perfect home to buy. With scores of available mortgage options available, prospective applicants can find the process confusing, to say the least. The following guide is designed to help clear away some of this confusion and offer sound basic information that buyers can use to select the best possible mortgage option for their specific situation.
The Conventional Mortgage
The conventional mortgage is the "plain vanilla" option for the Canadian home buyer, as it has been for decades. Borrowers who are considering this traditional mortgage option should understand that they will need at least twenty percent down, with even larger down payments considered optimal due to low loan-to-value ratios.
The Fixed Rate Mortgage
Fixed rates mortgages offer a fixed interest rate for a period of time, usually one to five years. While the actual interest rate for this type of mortgage can be slightly higher than other types, it remains a popular option among prospective borrowers who want to experience a more level budgeting process. With currently low interest rates available through much of the Canadian home financing market, many prospective buyers are currently taking advantage of this mortgage option.
The Portable Mortgage
As the name implies, a portable mortgage gives the borrower the opportunity to move their current mortgage to another property when moving to a different home. This can be a cost and time savings for people who need to move frequently because it allows them to retain their same the same interest rate, and eliminates the need to go through another application process. In addition, it can also reduce or eliminate any penalties that might otherwise occur if it were necessary to break another type of mortgage contract. Before deciding on a portable mortgage, however, prospective applicants should understand all restrictions and make sure that their lender offers this type of mortgage option.
The Blanket Mortgage
Used more often for condominiums or housing co-op situations, the blanket mortgage is registered against an entire property, with the owners of individual units assuming a portion of the total responsibility. Before considering a blanket mortgage, borrowers should make sure they understand the terms of the mortgage and the risks it could present to them.
The Assumable Mortgage
The assumable mortgage allows the buyer to assume an existing mortgage on a property when purchasing it. This can be a cost savings, particularly during periods when interest rates are trending higher. Buyers who purchase a home using an assumable mortgage pays the original monthly payment amount and interest rate for the remainder of the existing term, just as the original note holder did. Once this existing loan term is complete, the borrower will need to reapply and secure a new mortgage. Home sellers often prefer buyers use an assumable mortgage, as it can help them avoid paying some of the fees that are due when ending or closing out a mortgage.
The High LTV Mortgage
Also known as the high ratio mortgage, the high loan-to-value (LTV) home mortgage is a good option for the borrower who wants or needs to borrow more than eighty percent of the property's appraised value or purchase price (whichever is less). Before considering this type of mortgage, prospective borrowers should understand that they will be required to pay for mortgage loan default insurance when using this option, which which can add a considerable amount to the monthly payment.
For more information about available mortgages or assistance with choosing the one that will be best for your individual situation, prospective borrowers should discuss the matter with a reputable home loan provider or their trusted real estate professional. Perhaps you're looking to buy a great home in Drake Landing. Whatever your goals, a professional can help you understand what it takes to achieve them.