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What Is a Mortgage?
A mortgage is a loan used to purchase or refinance real estate such as a house, condominium, townhouse, or commercial property. Because most people cannot pay the full purchase price upfront, a lender (such as a bank or mortgage lender) provides the funds, and the property itself is used as security for the loan.
In return, the borrower agrees to:
Repay the loan over time
Pay interest on the borrowed amount
Follow specific terms and conditions outlined in the mortgage agreement
Mortgages are typically repaid over long periods, often 25 to 30 years, making homeownership more affordable by spreading payments over time.
Mortgage Calculator
Without mortgages, homeownership would only be possible for people with large amounts of cash, which would limit opportunities for most buyers. A mortgage allows individuals and families to:
Buy a home without paying the full price upfront
Build long-term wealth through property ownership
Lock in housing costs compared to rising rent
Use leverage to invest in real estate
Why Do We Need a Mortgage?
Types of Mortgages in Canada
1. Fixed-Rate Mortgage
Interest rate stays the same for the entire term
Predictable payments
Good for budgeting and stability
Protects against rising interest rates
2. Variable-Rate Mortgage
Interest rate fluctuates with the market (prime rate)
Payments may change or interest portion may vary
Usually starts with a lower rate than fixed
Can save money if rates decrease
3. Adjustable-Rate Mortgage
Similar to variable, but payment amount changes as rates change
More sensitive to rate increases
4. Open Mortgage
Can be paid off anytime without penalty
Higher interest rate
Useful if you plan to sell or refinance soon
5. Conventional Mortgage
Down payment of 20% or more
Does not require mortgage insurance
6. High-Ratio Mortgage
Down payment less than 20%
Requires mortgage default insurance (CMHC or equivalent)
Interest is the cost of borrowing money. It is calculated as a percentage of the mortgage balance and paid to the lender in addition to repaying the principal (the amount borrowed).
Your mortgage payment includes:
Principal – reduces your loan balance
Interest – cost of borrowing
(Sometimes) property taxes or insurance
Early in the mortgage, a larger portion of your payment goes toward interest. Over time, more goes toward principal.
What Is Interest?
Mortgage Payment Options
Borrowers can choose how often they make payments:
Monthly – most common
Semi-Monthly – twice per month
Bi-Weekly – every two weeks
Accelerated Bi-Weekly – equivalent to one extra monthly payment per year
Weekly / Accelerated Weekly
👉 Accelerated payments can significantly reduce interest and shorten the mortgage life.
What Is CMHC and How Does It Work?
CMHC (Canada Mortgage and Housing Corporation) is a government-backed organization that provides mortgage default insurance.
Why CMHC Insurance Is Required
If your down payment is less than 20%, lenders require insurance to protect themselves in case of default.
How It Works
Insurance is paid by the buyer
Premium is usually added to the mortgage
Protects the lender, not the borrower
Allows buyers to purchase with as little as 5% down
Approximate CMHC Premiums
5% down → approx. 4% of mortgage amount
10% down → approx. 3.1%
15% down → approx. 2.8%
(Exact amounts depend on down payment and property value)
Mortgage protection insurance helps protect your family in case of:
Death
Critical illness
Disability
How Much Does It Cost?
Cost depends on age, health, loan amount, and coverage
Typically ranges from $30 to $150 per month
Can be purchased through lender or private insurance provider
Many buyers choose independent insurance for better coverage and flexibility.
The First Home Savings Account (FHSA) is a Canadian registered account designed to help first-time home buyers save for a down payment.
Key Benefits
Contributions are tax-deductible (like RRSP)
Withdrawals for a qualifying home purchase are tax-free (like TFSA)
Lifetime contribution limit: $40,000
Annual contribution limit: $8,000
This account combines the best features of RRSP and TFSA, making it one of the most powerful tools for first-time buyers.
The Home Buyers’ Plan (HBP) allows first-time buyers to withdraw money from their RRSP to buy or build a home.
How It Works
Up to $35,000 per person
Couples can withdraw up to $70,000
No tax at withdrawal
Must repay the amount over up to 15 years
Repayments go back into your RRSP
Benefits
Access funds without immediate tax impact
Helps increase down payment
Reduces mortgage size and interest costs
A mortgage pre-approval confirms:
How much you can afford
Your estimated interest rate
Your payment structure
Benefits of Pre-Approval
Stronger offer when buying
Avoids wasting time on unaffordable homes
Locks in rates (usually 90–120 days)
Reduces stress and surprises
Pre-approval should always be the first step before viewing properties.
Mortgage Broker
Works with multiple lenders
Finds competitive rates and flexible terms
Personalized advice
Often no direct cost to the client
Can access lenders banks do not offer
Why Consider a Mortgage Broker?
A broker works for you, not one bank. They compare options, negotiate on your behalf, and help structure the mortgage based on your financial goals.
Bank
Offers only its own products
Limited flexibility
Familiar brand and branch access
May not provide best rate or terms
Choosing the right mortgage is one of the most important financial decisions you will ever make. Understanding your options, using available government programs, and working with experienced professionals can save you thousands of dollars over the life of your mortgage. Whether you are a first-time buyer, upgrading, refinancing, or investing, informed decisions lead to long-term financial success.