How to Get the Best Mortgage Deals in Canada
Getting pre-approved financing is a necessity in acquiring a home in Canada due to upfront payments, particularly your down payment. The down payment depends on the purchase price of your home, while your mortgage loan can cover the rest of the amount.
Amortization and Payment Schedule
The longest amortization period, or length of time you need to complete the mortgage payment, is 25 years if your down payment is less than 20%. The minimum down payment for a home is five percent if its purchase price is $500,000 and below. Your monthly payments are lower if your amortization is long, but you’ll have to pay higher interest.
Canadian lenders normally have the following payment schedule options: weekly, semi-monthly (twice a month), or monthly.
Closed and Open Mortgages
You can choose between a closed or open mortgage when deciding on the type of mortgage that will suit your financial capability.
In a closed mortgage, the amount you must pay during your mortgage term is fixed. The mortgage term refers to the length of time that the interest rate and the options you chose are in effect. Closed mortgages usually have a lower interest rate.
There are penalty fees for making prepayments or beyond the minimum monthly payment. However, some lenders offer what they call a “prepayment privilege,” and the amount varies from lender to lender.
This mortgage type is best if you plan to keep your home for the duration of your loan term.
Meanwhile, an open mortgage allows you to make prepayments but it has higher interest rates. Open mortgages also permit you to fully pay off your mortgage. You can also renegotiate your mortgage or break your contract to change lenders before the end of your mortgage term.
An open mortgage is therefore advisable if you want to pay off your mortgage before the term ends. You can also go for this option if you have extra money to put toward your mortgage regularly.