Refers to the length of time the bank has agreed to lend you the money – typically from six months to five years. At the end of the term, you can generally renegotiate a new term.
The length of time it will take to pay off the whole mortgage. The longer the amortization period, the lower your monthly payments, but the more interest you will pay over the term.
Interest is the cost of borrowing money, calculated annually. Using a mortgage calculator, you can determine your monthly payments based on the mortgage amount required.
SIZE OF THE DOWN-PAYMENT
You want as small a mortgage as possible, which means making the biggest downpayment possible. Down payments of less than 20% will attract an additional expense of mortgage default insurance.
FIRST TIME HOME BUYERS
If you’re a first-time homebuyer with money in an RRSP, you can withdraw up to $25,000 without paying any income tax. If your spouse is also eligible, that’s $50,000.
FIXED VERSUS VARIABLE RATE
If you choose a variable interest rate, you may be paying a fluctuating interest rate throughout the term of your mortgage. Increases in the Bank of Canada’s prime lending rate determine the impact on variable rate for any given time. Fixed rate mortgages on the other hand, will give you the security of knowing exactly what your monthly payment will be for the full term of the mortgage.
DOCUMENTATION REQUIRED FOR MORTGAGE APPLICATION
- Letter of employment confirmation (including your position, your pay and your years of employment with the company)
- Notice of assessment for the past two years from Revenue Canada
- List of your assets (car, stocks, bonds, GICs, etc.)
- List your liabilities and monthly debt obligations (car payments, student loans, credit card debt, etc.)
- Social Insurance Number
- Banking account confirmation
- Lawyer’s contact information