Loan Articles

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.

Apart from high-ratio mortgages, Canadian borrowers can look into other types of mortgage loans, including equity mortgages, closed and open mortgages, preapproved mortgages, bridged financing, and others. Mortgages are offered by a variety of financial institutions, including credit unions and banks. The Canadian Imperial Bank of Commerce, for instance, offers different mortgage solutions, including fixed-rate open mortgages, fixed-rate closed mortgages, convertible mortgages, and other mortgage loans. Clients of the bank who choose a convertible mortgage get a fixed-rate, short-term mortgage loan which lowers the risk of varying payments. Borrowers are allowed to prepay up to 10 percent a year and can make additional payments. They can choose a long amortization period (not longer than 30 years) to repay the mortgage loan, allowing them to improve their cash flow. Another option is a fixed-rate open mortgage, offered with a term of six months to one year. The interest rate offered by the bank can be as low as 6.35 percent, and borrowers are given the flexibility to pay off the mortgage loan at any time or make lump sum payments.

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.