Obtaining a Mortgage
You should always obtain a pre-approval from a lender or mortgage broker before entering negotiations. Your offer to purchase will always contain the clause Subject to Financing as a safe-guard for your benefit (unless you are paying cash for the property). Be aware that a pre-approval is not a promise to advance a mortgage, only an approval-in-principal based on the qualifications you presented at the initial application. The lender may require a property appraisal, land survey, and other information about the property to confirm that it is worth the purchase price. The lender may also require extensive documentation so try to allow plenty of time to gather the materials you need.
Depending on your income source and down payment you may qualify for a conventional or high ratio mortgage.
This is a loan equal to or less than 80% of the property’s lending value. The lending value is the market value or the purchase price, whichever is less. This type of mortgage does not require mortgage insurance.
This is a loan for an amount greater than 80% of the lending value. The maximum ratio is 95% loan to value. This type of loan requires mortgage insurance at rates based on the total amount down.
Mortgage term and amortization
The term is the length of time for the mortgage conditions and amortization is the total length of time the payments are spread over. For example, you might have a five year mortgage with a 25 year amortization. Your payments will be based on 300 months and the contract will need to be renewed with a lender after five years.
You can choose a payment schedule that is convenient and efficient for your situation. More frequent payments can reduce the overall interest paid to the lender and shorten the amortization time. It may be convenient for you to choose a payment frequency similar to your pay cheques.