When Shopping For A Mortgage

When shopping for a mortgage, keep your goals and needs in mind. There are many options, and a mortgage can be customized for your own circumstances.

Types of mortgages include uninsured low ratio or conventional mortgages and high ratio mortgages. Then there are a variety of features and payment options to consider. Mortgages are available on a closed or open basis, at fixed or variable rates and can have various terms generally ranging from six months to five years, but some institutions will offer seven or 10-year terms. Generally, most mortgages are amortized over 25 years.

Other features and options to look for when shopping:

Partial pre-payment: This allows you to make extra payments against your principal.

Compound interest: This refers to the interest that’s charged on the interest owing on your mortgage. The more frequent the compounding, the more interest you’ll pay. Most traditional mortgages have the interest compounded semi-annually. In the case of variable rate mortgages, interest is usually compounded monthly.

Increases in regular payments: Some lenders will let you increase your regular payments. These vary by lender but are generally between 10 per cent and 25 per cent. This can save you thousands of dollars in interest costs over the life of your mortgage.


Frequency of payments: With this option, you are not confined to making your mortgage payments monthly, you can arrange your payments with your pay cheques, making them weekly. This flexibility may help you budget better, and the more frequently you pay your mortgage, the more you’ll save on interest costs over time.

Portability: If you are selling your present home and buying another, this option allows you to take your mortgage – with the same term, rate and balance – and apply it to your new house. If your mortgage isn’t portable, don’t sign for a longer term than you’re likely to stay in the house or you could wind up paying a pre-payment fee to break the mortgage agreement.

Assumability: This feature allows the buyer of your house to take over or “assume” your mortgage. If your mortgage has a fixed interest rate lower than current rates, it could be an attractive selling feature.

Early Renewal: This allows you to renew your mortgage before it matures. It is a useful option if you expect mortgage rates to increase because it allows you to take advantage of current rates. If current interest rates are lower than your existing mortgage rate, you will likely have to pay a pre-payment fee for renewing early.

Make sure to inquire about options that interest you.

- Canadian Bankers Association, www.cba.ca