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What is a mortgage pre-approval?
Mortgage pre-approval explained
How to get pre-approved for a mortgage
Getting pre-approved for a mortgage
How much should my down payment be?
Typically a down payment should be at least 20% of the purchase price of the home. If purchasing a property valued at $1,000,000 and above, a minimum of 20% down payment will be required.
When purchasing a property with less than 20% down payment, the property value must be less than $1,000,000 and the minimum down payment amount must be as follows:
- Minimum of 5% of the value below $500,000
- 10% of the difference above $500,000 up to $1,000,000
For example, if the property value is $700,000, borrowers must have $25,000 down payment on the first $500,000 and 10% ($20,000) of the $200,000 above the $500,000. In this case, a minimum of $45,000 would be required as a down payment.
I Have More Than 20% Down Payment.
You will need to get an appraisal. This is typically a cost to you of about $400, but you will not require mortgage insurance once this is completed.
What If My Down Payment Is Less Than 20% Of The Home Purchase Price?
You will need to purchase mortgage insurance. Mortgage insurance comes from three different companies
- CMHC – the largest one and 100% back by the government of Canada
- Sagen – 95% backed by the Government of Canada
- Canada Guarantee – 95% backed by the Government of Canada
What Is Mortgage Insurance?
Mortgage insurance is designed to protect the lender in case you default on your mortgage payments. However, mortgage insurance can mean lower interest rates, as it means less risk to the lender.
What Is The Interest Rate Of A Mortgage Pre-Approval?
There are two types of rates for a purchase mortgage
- Fixed-rate – remain the same for the entire term of the mortgage
- You may pay a higher rate than variable
- Often have higher penalties
- Variable-rate – variable rates adjust with prime
- Priced lower than a fixed rate
- Tend to perform better than fixed in the longer term
- Lower penalties
What Is Mortgage Amortization?
This is a term used to describe the amount of time it will take you to pay off your mortgage. Insurance mortgages have a maximum amortization of 25 years, and uninsured have a maximum amortization of 30 years. The longer the amortization, the smaller your payments.
What Is A Mortgage Term?
The mortgage term is how long you are guaranteed a rate (fixed rate)or a discount (variable rate)
What Is A Mortgage Term?
The first step to qualifying for a mortgage and purchasing your dream home is to get pre-approved. Lenders will evaluate you on three aspects
- Your credit
- Amount of down payment
Work with a mortgage broker to get you the mortgage that is right for you and right for your circumstances.