Unfortunately, it’s not that simple. The short answer is you won't know that you received a great rate unless you've shopped your mortgage to numerous lenders. The long answer involves learning what the major banks' posted rate is really all about. With a couple of minor exceptions, ONLY the major banks have posted rates. The major banks' posted rate is found on a rate sheet and the posted rate has no meaning whatsoever at the time you’re taking your mortgage. The only time the posted rate comes into play is when you break your mortgage before the end of the term resulting in a prepayment penalty. The prepayment penalty…

A pre-approved mortgage confirms in writing by a lender the maximum amount of money that they are willing to lend you for the purposes of a mortgage. This is especially useful during a time when interest rates are fluctuating. The advantage to you is you know exactly what your borrowing limit is before you start house hunting. With a pre-approval, a lender will guarantee you a specific mortgage amount for a specific period of time. In the event the mortgage interest rate drops before the lender advances you the funds for a mortgage, our licensed mortgage professional will ensure you…

Any home purchase where less than 20% down payment is made will require a high-ratio mortgage. If you are a first-time homebuyer then you can borrow up to 95% of the home value and only need to come up with a 5 percent down payment as a minimum. High-ratio mortgages insure the lender in case of mortgage default by the borrower. There are 3 mortgage default insurers in Canada of which the Canadian Mortgage & Housing Corporation (CMHC) is the largest. Although default insurance protects the lender, the lender passes the cost of the insurance premiums down to the borrower.…

Mortgage amortization refers to the total number of years, often 25 years, that it will take you to completely pay off your mortgage. Once the mortgage amortization period is complete, the mortgage is always fully paid off and no more payments are due. The mortgage term refers to the contracted lending period of time that the mortgage terms and interest rates are in effect. After the term expires, the borrower has 2 options: 1) To completely pay off the remaining balance of the mortgage with their own funds, or 2) To renew the mortgage for another term with either the same…

Generally, an open mortgage gives you the most flexibility in making extra payments towards your mortgage principal and even allows you to pay off your mortgage balance entirely at your discretion. However, this flexibility comes at a cost to the borrower in terms of a higher interest rate. In contrast, a closed mortgage offers little to no privileges in paying off your mortgage early. You cannot pay off your mortgage without attracting penalties, referred to as prepayment penalties. Note of caution - not all closed mortgages are created equal. It is best to check with your licensed mortgage professional as to…

Despite popular belief, the advantages of bi-weekly vs. monthly payments is slight. It is not the payment frequency that makes the difference to pay off your mortgage early, but rather how much you pay towards your outstanding principal. Any extra payments toward your principal will dramatically reduce your amortization period. Think payment amount and not frequency as the key to paying off your mortgage early. In other words, look at the total amount you’re paying towards your mortgage over the course of a full year, regardless of payment frequency, to determine whether your mortgage is being paid down faster.

A Co-signer is placed on the mortgage and is registered on title. A Guarantor signs a document that personally guarantees the mortgage but is not registered on title. Most lenders will allow for both on an application. Generally, a co-signer is required when the borrower, in the eyes of the lender, has insufficient income to support the full costs of homeownership. A lender may ask for a guarantor if the borrower’s credit falls short of the lender’s requirements.

There are two rates on a mortgage - the one you get going in and the one you get going out! Major banks offer clients a discount off of their posted rate, or sometimes they refer to the lower rate as a special off the posted rate. The reason for this is they will always use the posted rate when calculating the penalty should you look to break your term. Many Canadians have benefitted over the past several years of breaking their closed mortgages and opting for a new mortgage with lower rates (nearly three-quarters of all 5-year closed mortgages in…

No - the lender is not under any obligation to renew your mortgage. There is no automatic renewal. In fact, if you have 'missed' or have been late with any payments, the lender can legally use this as an excuse not to renew with you. A loss of a job or a divorce is usually the other reasons we have seen for a lender to refuse a mortgage renewal. In truth, no excuse is necessary for the lender to not renew your mortgage term. A lender can refuse to renew because they simply do not like the current economic climate of…

Sometimes a lender will attempt to charge a renewal fee or tempt you to renew without a fee if you sign within a certain 'time offer' at their posted rates. This is very often the case with the major banks. Please keep it mind that by using a licensed mortgage professional, it is very rare for you to ever pay any renewal fees. For conventional residential mortgages, there will not be a renewal fee because the licensed mortgage professional will shop the market for you and find a lender that not only does not charge a renewal fee but is also…

A second mortgage is simply an additional mortgage registered against the title of your home. Some lenders call it a "Home Equity Loan" or "Home Equity Line of Credit" and since these types of loans are registered against the title of your home as a second charge - they are all second mortgages. First and second mortgages are characterized by when they were registered on title respectfully, not by how much money was advanced or is owing.

A reverse mortgage is a loan secured against the value of your home. It is designed exclusively for homeowners aged 55 years and older. It enables you to convert up to 55% of your home's value into tax-free cash. The funds from a reverse mortgage can be used for whatever reason you desire; to cover monthly expenses, renovate your home, pay off debt, or travel. Growing in popularity, many reverse mortgagors are using the proceeds to gifting their loved ones with an early inheritance so they can witness first-hand the impact of those inheritances! With a reverse mortgage, you maintain ownership…