Mortgage Education

Our mortgage education topics are specific to Canadian mortgages, and they focus on the most common topics of confusion throughout the mortgage process.

One of the most overlooked aspects when budgeting for a mortgage are the closing costs, which includes the fees that are incurred when the title to the property is transferred to you. Closing costs are usually around 1.5 percent of your total mortgage. Some of the more common closing costs include:

  • Legal fees ($1200-$1500)
  • Appraisal fees ($250-$600)
  • Property tax adjustment (please confirm this amount with your Lawyer)
  • Interest adjustment (please confirm this amount with your Lawyer)
  • Title insurance ($200-$300)
  • Fire insurance ($500-$1500)
  • Home Inspection ($300-$400)
  • Real Property Report (you may be able to obtain a copy from the previous home owners)
  • Utility connection charges

A fixed rate mortgage is the most popular interest rate option. With a fixed interest rate, the mortgage payment you make each month will stay constant for the term of your mortgage (until your mortgage renewal).

With a variable rate mortgage, your payments will fluctuate based on the prime rate set by your lender. Your payments will always be prime +/- a specified amount (for example, prime + 2%). When your lender changes their prime rate, your mortgage payment will also change.

Step 1: Pre-Approval
When you decide you are ready to purchase a home, getting pre-approved is always a great idea. Not only does it secure an interest rate for up to 120 days, it also gives you the peace of mind that comes with knowing what you can afford and allows you to shop within your price range.

Step 2: House Hunting
Once you’ve secured your pre-approval, it’s time to meet with your REALTOR®. They will discuss the details of what type of home you are looking for and what your price range is. Bringing along your list of must-haves versus your wants can also help you set realistic expectations and give your REALTOR® the information they need to find properties that meet your criteria.

Step 3: Offer in and Accepted
Once you’ve found that perfect home, you decide what offer to make and your REALTOR® will relay that offer to the sellers Listing Agent on your behalf.
If accepted, the offer will be considered “subject to financing,” meaning that the offer depends on whether or not you are able to obtain mortgage financing from a lender. Your offer may also have other conditions, such as “subject to a satisfactory home inspection.”

Once your offer is accepted, your broker can help you secure what’s called a ‘conditional mortgage approval.’ This means you’re approved for a mortgage as long as you can meet the conditions listed. Your broker will work with you to do this. Take a look at our mortgage process page to gain a better understanding of what these steps will look like.

Step 4: Meeting Conditions
At this stage, you may need to provide some updated documentation to your broker. Your broker team will act as a liaison for you throughout this process, coordinating with your lender, insurer, and appraiser (if necessary) to make sure your mortgage gets fully approved.

Step 5: Lawyer’s Office
Assuming you were able to meet all of the conditions and secure a full mortgage approval, the next step will be an appointment with our lawyer’s office. Your lawyer prepares the documents necessary to transfer the title of the property to your name, and will require your signature and proof of fire insurance for your new home.

Step 6: Move in!
Congratulations! It’s time to move in to your new home. Within the first month of your move-in date, you should receive an information package from your lender outlining your mortgage details. 

When you put a down payment of less than 20 percent on your mortgage, your mortgage is considered ‘high ratio.’ All high ratio mortgages require mortgage default insurance. You may have heard of this type of insurance referred to as CMHC or Genworth fees.

Mortgage default insurance protects the Lender in the case that you default on your mortgage. In Canada, CMHC, Genworth and Canada Guaranty are the three main providers of this type of insurance. The premiums are typically added on to the cost of your mortgage and are included in your mortgage payments. The maximum amortization for loans that require mortgage default insurance is 25 years.

The amount of your premium depends on the amount of your mortgage and what percent your down payment will be. To calculate your premium, you can use our mortgage calculator – just enter the total amount of your mortgage and we will show you what your payments will look like including these fees.
It is important to note that there is a difference between this type of insurance and insurance that protects you, the borrower, in the event of a loss.

Payment frequency is how often you choose to make your mortgage payment. Monthly, bi-weekly, and bi-weekly accelerated are a few of the most popular payment frequency choices.

How can this affect your mortgage?
Let’s take a look at the difference between bi-weekly and bi-weekly accelerated payments. With bi-weekly, you would pay your mortgage twice per month. This means you would be making 24 payments per year. With accelerated bi-weekly, you would make a mortgage payment every two weeks. This works out to 26 payments per year.

Here’s a real life example:
If you had a $350,000 mortgage and made a 10 percent down payment, chose a 25 year amortization and secured an interest rate of 3 percent, you would end up paying $135,390 in interest if you made regular bi-weekly payments. By switching your payments to accelerated bi-weekly for the same mortgage, you would be paying $118,755 in interest and have your mortgage paid off in 22 years.

By increasing the payments from regular bi-weekly to accelerated bi-weekly for this particular example, there is a whopping $16,635 of savings and the ability to be mortgage free almost 3 whole years sooner.

Getting pre-approved for a mortgage will tell you:

  • Exactly how much you’re approved for
  • At what interest rate (and will secure this rate for up to 120 days for you); and
  • What your payments would be at that amount.

It’s important to make sure you secure a full pre-approval (which involves a comprehensive review of your documents) rather than a pre-qualification. The latter is meant to give you a general idea of what you may be able to afford and does not involve a thorough document review beforehand.

A Mortgage Broker is someone who acts as an intermediary between you and a lender. There are several advantages to using a broker, some of which include:

  • The cost – In the vast majority of cases, Brokers are paid by way of a ‘finder’s fee’ from the Lender, and not by you.
  • Independent, objective mortgage advice – It’s our job to act in your best interest, because our business depends on you having a positive experience.
  • Research – We do the research for you. With the vast amount of information available at your fingertips, it can be hard to determine what is relevant to your specific situation. It’s our job to know the industry, so we can give you the very best advice.
  • Negotiating power – Lenders compete to gain our business, and this translates to savings for you. We also have access to rate specials that may not necessarily be available to the public.

Not all brokers operate the same. If you want to learn more about our approach and how our team works together to benefit you, take a look at the Innovative Difference.