What You Need to Know About Securing and Keeping Your House Mortgage In Good Standing

Many Canadians dream of owning their own home, but for most, the cost of buying a home generally requires a home mortgage to make this dream come true.

First, a mortgage is a special type of loan dedicated to the purchase of a house, townhouse or other property. A mortgage can be provided by banks, credit unions and other lenders who specialize in mortgages. And just like other loans, you will be charged according to the amount that you borrow. However, there are a number of features that make mortgages unique from other types of loans like student loans or car loans.

A mortgage can be financed for a single year all the way up to 30 years. The amount of time that the mortgage is for is called its “term”. When you repay a mortgage, you need to repay the cost of the mortgage itself (called the “principal”), as well as additional fees such as interest that has accrued on the loan, taxes and Canada Mortgage and Housing Corporation (CMHC) insurance if it applies. CMHC insurance is required if your down payment is less than 20% of the purchase price of your home, and your mortgage would be considered conventional or high ratio.

There are several different types of mortgages. Here’s a quick overview of a few of them:


-          Open mortgage: Open mortgages can be repaid in full or in part at any time without the buyer having to pay any penalties. With an open mortgage, you would usually make other payments in addition to your regularly scheduled mortgage payments. Since open mortgages are usually for very short terms, they might be a good option for you if you want the flexibility of being able to sell your home soon – and without a lot of notice.


-          Closed mortgage: Closed mortgages are some of the most common as they offer the lowest interest rates. However, they are not very flexible if you decide to sell at short notice. They typically cannot be renegotiated or refinanced before the contracted term ends and without incurring penalties to end the mortgage early.


-          Variable rate mortgage: With a variable rate mortgage, your interest rate may go up or down and can vary from month to month. In this case, more of your money may go toward paying the interest portion of your mortgage payment rather than the principal. Variable rate mortgages are a good option if you want more competitive interest rates and if you can handle the uncertainties of possible fluctuations in your interest rate.


-          Fixed rate mortgage: With a fixed rate mortgage, your interest rate will stay the same for the duration of your mortgage, regardless of whether interest rates go up or down. Fixed rate mortgages tend to be slightly higher than variable rate mortgages since they provide security in letting you know exactly what your mortgage payments will be for the entire length of your mortgage.


-          Long-term mortgage: Long-term mortgages usually last for three years or more.


-          Short-term mortgage: Short-term mortgages usually last for two years or less. These mortgages are ideal for buyers who believe that interest rates will be lower when they renew their mortgage.


Have a question about purchasing a home or getting a mortgage? Leave it in the comments below and I’ll get back to you as soon as I can!

Wes Ayranto

Wes Ayranto

Sales Representative
CENTURY 21 B.J. Roth Realty Ltd., Brokerage*
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