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Mortgage Loan Basics
Here are a few definitions to help
you see your way through mortgage loans. In addition, consult
the section Purchasing a
Property to obtain a wealth of advice and tools.
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Conventional or Insured Mortgage Loan?
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As a general rule, a mortgage loan cannot
exceed 80% of a property’s value. This type of loan is called a
conventional mortgage loan.
Purchasers who would like a bigger loan must
purchase mortgage
insurance from the Canada
Mortgage and Housing Corporation (CMHC) or GE
Mortgage Insurance Canada. This type of loan is called an insured
mortgage loan.
With an insured mortgage loan,
purchasers may obtain a mortgage loan of up to 95% of the purchase price
or the market value of the property they wish to buy.
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Amortization Period
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The amortization period is the period of time—most
often 15, 20 or 25 years—required to repay the debt in full when
payments
are made regularly. The longer the amortization period, the lower the
payments.
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Mortgage Term
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The mortgage term is the chosen period of
time for which the conditions of your mortgage are negotiated and agreed
on.
The term chosen affects the interest rate
on your loan and therefore the payments.
As a general rule, for the same amortization period, the shorter the term,
the lower the interest rate and the payments. |
