Anyone buying a property will almost certainly require a mortgage. What is the process of getting a mortgage in Canada? It’s a basic financial instrument, but its many alternatives and interest rates might be perplexing. Because buying a home will most likely be the most significant investment of your life, you’ll want to be sure you understand how mortgages work.
How Does a Mortgage Work?
A mortgage is a loan that you take out to finance the purchase of a home. It’s a product that you’ll pay back for the duration of your home ownership, which means that you’ll be paying an interest rate for the use of your money. The principal of your mortgage is the amount of money you actually borrowed, while the interest is the fee you need to pay back to the bank to use your money.
What are the Qualification Criteria to Get a Mortgage in Canada?
Before you apply for a mortgage, it’s important to consider these five requirements for your application to run smoothly with any lender in Canada.
1. Down Payment
In Canada, buyers are required to have a minimum down payment of 5%. The minimum down payment can differ from lender to lender, with the average being 10%.
2. Credit Score
A good credit score is an important part of the application process when getting a mortgage in Canada. Your lender will look at your credit score, which is a reflection of your entire credit history. This score poses a minimum of at least 600 to 680, with a higher number reflecting a better credit history.
3. Secured Income
The lender will also look for proof of income and a steady job. This can be done with a letter from an employer, or by providing your most recently filed tax return.
Types of Mortgages
Do you intend to make additional payments to pay off your mortgage as soon as possible? Then you should try to acquire an open mortgage, which is more flexible in terms of prepayments. This sort of mortgage, however, normally has a higher interest rate.
On the other hand, a closed mortgage has a lower interest rate but limits the amount of extra money you may put down to pay off your mortgage faster. If you try to make prepayments that exceed the maximum specified by your lender or if you want to breach the mortgage arrangement, you will normally be charged a penalty fee.
Amortization Period and Term
It’s important to remember that both the amortization period and the term of the mortgage refer to the length of the loan that you will pay off. This length differs between mortgages, and it’s important to understand that the shorter the amortization period, the lower the interest rate is. The term refers to the number of years you will be paying off your mortgage loan. Depending on the lender, the maximum term of a mortgage loan is 30 years. You can, however, choose to pay it off in a shorter period.
There are many different mortgage options available, and it’s important to know how every one of them works. However, with a good understanding of your finances and of your finances, you can mortgage with confidence.
Ottawa Mortgage Services provides mortgage agent services for first-time homebuyers, self-employed individuals, commercial clients, and more. We also help clients with refinancing, pre-approvals, and debt consolidation. If you’re a first-time home buyer in Ottawa, we can help you find the right mortgage in the right neighbourhood. Get in touch with us today and let us know how we can help!