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A consumer guide and workbook - page 32 / 79





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You don’t have to get your mortgage from the same place you have your savings or chequing accounts. Also, at the end of each term, you may be able to change the options of your mortgage, such as the payment schedule, the term, the rate, even who holds the mortgage.

Mortgage Features


This lets you expand the principal on a first mortgage at the lender’s agreed-upon rate of interest. This can be a cost-effective way to finance a home renovation.

Types of Mortgages

Conventional Mortgage

This mortgage is for an amount which does not exceed 75% of either the appraised value of the property or the purchase price, whichever is Prepayment Ensure that you have some form of prepayment clause in your mortgage that will allow you to pay down your mortgage with a lump sum, or an extra payment, without penalty. lower. Your down pay- ment is a minimum 25% of the purchase price. Consider all the options to help customize a mortgage to fit your needs. High-ratio Mortgage Portability With this type of mort- gage, you contribute less than 25% of the cost of the home as a down payment and as little as 5%. This means you can transfer the terms and conditions of your mort- gage to your next home. For example, this may allow you to keep a low interest rate if you sell one house and buy another. A high-ratio mortgage requires mortgage loan insurance. CMHC offers it for a premium of between 0.5% and 3.75% of the mortgage amount (additional charges may apply). This premium can be added to your mortgage payments or paid in full on closing. Assumability This means you may be able to assume (take over) the existing mort- gage on the property. It may have attractive features, such as a lower interest rate than the prevailing market. Second Mortgage In turn, an assumable mortgage may be a selling feature for you when you decide to move on in the housing market. This usually has a higher interest rate and shorter amortization than a first mortgage. Secondary financing is often used to make renovations to a home.

You can achieve mortgage freedom sooner by increasing the frequency of your payments.

By making payments every two weeks, instead of monthly, a 25-year mortgage can be reduced to 20 years.



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