A mortgage is a legal contract between you and your lender.
Generally repaid over a 25-year period, the mortgage includes the amount borrowed (principal) and interest. Payments can be made weekly, bi-weekly, fortnightly or monthly. During the repayment period, the property acts as collateral in the event of non-payment. If you don't respect the terms of your contract, the lender has the right to seize your home. So it's important to pay your mortgage on time and keep your home in good condition.
With an open mortgage, you can pay off your loan early or terminate your mortgage contract, usually without penalty. It also offers greater flexibility should you ever need to make additional payments. Note that the interest rate on an open mortgage is usually higher than on a closed mortgage.
An open mortgage may be the option for you:
- If you plan to pay off your mortgage quickly;
- If you are planning to sell your property in the near future.
The number and amount of mortgage payments are fixed for the duration of the term. It is not possible to make a full mortgage repayment before the end of the term, otherwise a fee will be charged. Not all closed mortgages allow this, so it's important to discuss the terms and conditions with your lender. It's important to discuss the terms and conditions with your lender or mortgage broker.
A closed mortgage may be the option for you:
- If you expect to keep your property until the end of your contract;
- If you find that early repayment offers you enough flexibility to pay off your loan a little faster.
At the end of the term, you must renew your mortgage. There are several terms to pay off your loan in full.
The rate remains the same throughout the term. It varies only when the mortgage is renewed. This is convenient if you want stable payments.
The variable rate increases or decreases according to fluctuations in the prime rates of banking institutions. If you have a good risk tolerance and want to take advantage of rate decreases, this is the right choice for you.
- The purchase price of the home minus your downpayment (between 5% and 20%);
- Mortgage insurance (if your downpayment is less than 20%).
To calculate the amount of a mortgage, you need to :
- Subtract the downpayment from the property value to obtain the mortgage amount;
- Choose the loan term that best suits your situation (amortization);
- Determine the interest rate;
- Choose the payment frequency (monthly, fortnightly, bi-weekly, etc.);
- Add mortgage loan insurance, if applicable. It can be paid at the time of the transaction or included in the payments.
Then you can calculate the payment amount, which will include principal, interest, taxes and mortgage insurance.
Please note that if a lower rate was available with your lender prior to the mortgage transaction, you would get the lower rate, and if it went up, you would be protected by the rate guarantee.
Information required to obtain mortgage pre-approval
- Your income
- Your debts
- Your credit history
- All other relevant financial information
5 determining factors for your mortgage
- Your credit rating
- Your household income
- Your employment history
- Your financial reserve
- Your downpayment
Required documentsProof of down payment
- Promise to purchase signed and accepted with all annexes
- Property details
- Letter of employment (date of hire, gross salary and position)
- Pay stub
- Notice of assessment for the last two years
- Federal and provincial tax returns (T1 General) for the last two years
- Certificate of Location
- Property tax accounts
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