Canadian borrowers can use mortgage financing for many different purposes. They can apply for a mortgage loan to buy an existing property or construct or purchase a new home. Mortgage loans are also extended to finance the purchase of investment properties or the purchase of other types of investments. Borrowers can choose to finance a renovation or refinance in order to consolidate debts. Given that mortgages are a type of secured financing, borrowers are offered lower interest rates than they would normally get with other types of loans. The interest costs on fixed-rate mortgages and secured lines of credit are lower, and borrowers can choose to write them off against their taxable income.
The down payment on standard mortgages is around 20 percent, but some lenders offer the opportunity to put as little as 5 percent down. This is the case with GE Capital insured or CMHC insured mortgages, also known as high-ratio mortgages. Borrowers who opt for a high-ratio mortgage must insure the borrowed amount, and the premiums can be paid at closing or added to the mortgage loan. No insurance is required for mortgage loans of up to 80 percent. The premium stands at 1.75 percent for mortgage loans of up to 85 percent.
Another financial institution that offers mortgage loans is RBC. The bank provides a variety of mortgage solutions to choose from such as cash back mortgages, energy saver mortgages, variable rate mortgages, fixed rate mortgages, and others. Persons who choose a variable rate mortgage benefit from getting the lowest rate of interest available. This can save them significant amounts in interest charges over the mortgage term. Changes in the bank’s prime rate result in interest rate fluctuations, but repayments remain fixed. This type of mortgage is convertible. Clients who opt for a cash back mortgage obtain cash to be used for expenses such as closing costs. A cash back payment is offered at the time the mortgage loan is extended. The amount of money borrowers get depends on the term and size of the loan, but generally, it is up to 7 percent of the mortgage’s value. Borrowers who obtain a mortgage loan in the amount of $400,000, for example, get $20,000 cash back.