Written by Courtney Dorion   |   Posted on   |   500 views

Buying a home can be an exciting experience! And if you’re like most Canadians, you’ll need a mortgage to help you pay for this large expenditure. 

How do you choose the right mortgage for you?  Where do you even begin to look?

We’ve got your crash course in mortgages so you’re prepared for the big day when you find the home of your dreams!

What is a mortgage?

You may have saved up some money to put towards a house.  This is called your down payment.  To cover the remaining costs of the home purchase, you will need help from a lender.  A mortgage is a secured loan that you get from a lender to help pay the balance owing on this house.  

Learn more about How Much To Save For Your Down Payment.

Unlike most loans, you should note that:

  • you’ll need to qualify for this mortgage and pass a “stress test”
  • a down payment will be required 
  • you’ll need to renew this mortgage several times before the debt is paid in full
  • if you break the mortgage early you will be required to pay a penalty

3. The Interest Rate & The Term

Just like any other loan, the interest rate is the fee you pay your lender for using their money. The higher the interest rate, the more you’ll pay each month in mortgage payments.  

Your mortgage rate is negotiable, depending on some important factors:

  • your credit history & current credit rating
  • if you’re self-employed
  • the current posted rate by your lender
  • the type of lender you choose (bank, credit union, mortgage investment company etc.)
  • the length of your mortgage term

Your mortgage term is the length of time your current loan contract is in effect.  Terms can range from just a few months all the way up to 5 years.  At the end of each term, you’ll renew your mortgage if you can’t pay off the balance in full.

You’ll also note that your mortgage term has an effect on 

  • your interest rate and the type of interest you can get (fixed vs. variable)
  • any penalties you may have if you decide to break the mortgage earlier than expected
  • how often you need to renew your mortgage

Other Options To Consider

Most mortgage lenders will penalize you if you break the mortgage before the end of a term.  Meaning, if you decide to sell your home before it’s paid off, you may owe some penalty fees.  There is, however, some flexibility with this depending on the type of mortgage you choose.

If you sell your home and are going to buy another one, a Portable Mortgage allows you to transfer your existing mortgage. This includes the transfer of your mortgage balance, interest rate and terms and conditions.  This is just one of many options a qualified mortgage professional can offer you to reduce any penalties you face.

Where to get started?

To begin the process, your best bet is to get Pre Approved for a mortgage by a lender.  You may wish to speak to someone at:

  • your local bank
  • your credit union
  • a mortgage broker

Banks and credit unions offer you a variety of mortgage products, but you’ll need to do the leg-work and shop around to negotiate your best rate. 

Whereas a mortgage broker does the shopping for you! They will take your credit information and search for the best possible rate given your circumstances.  They can also offer you alternative  solutions if you don’t have great credit – private lenders may be one way of getting a mortgage if you have been denied elsewhere.

By having a pre-approval on a mortgage, you’ll know exactly what your budget is for the house you want to buy.  It’s also very favourable to sellers if they know you’ve been pre-qualified and have your finances ready for purchase.

*All information provided by the Brantford Regional Real Estate Association (BRREA) and ITSO for the highest number of completed transactions since January 1, 2015. All Brantford MLS® House Listings come from the various systems operated by Real Estate Boards and Associations across Canada. The trademarks REALTOR®, REALTORS® and the REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA. Used underlicense. The trademarks MLS®, Multiple Listing Service®, and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA. Used under license.



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