Mortgage Loans Canada
Buying a home is exciting, managing the financing can be stressful, but choosing a mortgage isn’t that complicated when you break it down. Before going to all those open houses, it’s best to know what you can afford, and the down payment required. In Canada, the minimum down payment is 5 percent on the first $500,000 of the home price, and 10 percent anything between $500,000 to $1 million.
Once you have a better idea of the numbers and your credit history you can narrow what type of Mortgage Loan works best for your needs. There are two types of loans to consider: a traditional mortgage loan from a financial institution or a private mortgage.
A private mortgage is a loan made by an individual or a business that is not a traditional mortgage lender. This type of mortgage lender is an alternative for those who can’t secure a loan due to bad credit history or other reasons. However, these types of loans typically come with a higher interest rate than traditional mortgages do.
Tips to consider:
When you buy a home, it is advisable to contact several mortgage lenders and prepare your finances and documents. Several different factors go into qualifying for a mortgage in Canada:
Good Credit Score: Check your credit score before applying because even if everything else is in check, bad credit can stop the entire process. Your credit score is the deciding factor for if you get pre-approved, and for how much. Lenders want assurance you can repay your debt, so they consider the following factors: payment history, outstanding debt, applying for new credit too often and the length of term.
Compare Lenders: Get to know the mortgage landscape. Read the fine print and ask questions about requirements and fees, including costs outside of the principal and interest payments. Remember this may be the single biggest purchase of your life, you need to have as much information as possible.
Interest Rate: Although all traditional lenders have a base interest rate set by the Bank of Canada, they can have different final rates to offer you, shop around. The type of term you choose will also determine your interest rate; a fixed-rate mortgage keep the same interest rate over a 4-5 year term. A variable mortgage means interest rates can go up or down with market conditions.
A mortgage loan is considered a first mortgage; for more information on second mortgages click here for our home equity loans page.
Ready to apply for a Mortgage Loan? Click here and apply in six easy steps.
Still have questions about mortgage loans in Canada? Contact a Lend for All representative for more information.