CHAPTER 8 Mortgage Financing
There are two types of mortgages in Canada, conventional and insured. Conventional mortgages require a minimum 20% down payment while insured mortgages can be as little as 5% down. There are pros and cons to both mortgages. Insured mortgages are less risk to lenders as the underwriter guarantees against losses so usually you can get a better interest rate. The con to insured mortgages is you have to pay the insurance premium. The more you put down the less the insurance premium you will pay. It's important to remember that all lenders look carefully at your ability to pay back the mortgage, so your credit score, job stability, and income are weigh heavy on their decision to approve you for a mortgage. Some lenders will actually pay off your credit cards and build that into the mortgage. If you have questions about that just reach out to me and I'll put you in touch with a mortgage broker than can explain everything.
Fixed Rate or Variable Rate
If you look back over the past 20 years, the variable rate has proven to be the best rate, but you have to be able to stomach the possible changes to the bank rate which will affect your monthly payment. In Canada currently there is a stress test meaning you have to have the income to qualify for a mortgage at a higher rate than you will pay. This stress test was implemented to make sure buyers don't overextend themselves to minimize foreclosures in Canada. If you choose a variable rate the stress test is at a lower rate but again you must be comfortable with the possible risk changes to your mortgage payment. Lenders will give you a more competitive rate if you commit to them for a 80
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