How can I get a mortgage?
Before you start serious house-hunting, you should work with your Realtor to determine how much you can afford. In the end, of course, you'll have to work with your mortgage lender who will have a very definite set of rules and criteria to follow before approving your mortgage.
How can I figure out how much mortgage I can handle?
Use the gross debt-service formula (GDS): principal, interest, and taxes (PIT) and energy costs (and condominium maintenance costs) on your mortgage loan should not exceed 32% of your gross income. Example: if your monthly payment for these items is $1,000, you'll need a gross annual income of at least $40,000.
What types of mortgages are available?
- Pre-approved mortgages are granted in advance on a mortgage for a specified amount with a guaranteed interest rate.
- Conventional mortgages are granted with the property as security, normally with a 25% down payment. If you don't have the 25% down payment, you will need mortgage insurance to qualify for a mortgage.
- Vendor take-back mortgages are granted when the seller underwrites part of the purchase as a loan to be repaid by you as the buyer. These are often used as second mortgages to bridge any gaps or to make the property more attractive to the buyer. In some provinces the seller may also transfer the mortgage to the buyer.
- Open mortgages are granted with the option that you can make extra payments on the principal, reducing your borrowing costs. Because of this flexibility, interest rates for open mortgages are a little higher.
- Closed mortgages are granted on the condition that you must wait until the term has expired to pay your own mortgage. Because of this inflexibility, interest rates on closed mortgages are generally lower.
- Partially open mortgages are granted with some of the features of both open and closed mortgages.
What types of payment methods are available?
- Monthly payments
- Bi-weekly monthly payments
- Weekly payments
- Accelerated payments which allow you to make extra contributions
- Shortened amortization period which raises payments but shortens the mortgage term
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