An Explanation of Different Types of Mortgages

A mortgage is a loan that is secured against real estate.

If you want to purchase a home, it is always a good idea to get pre-approved on a mortgage. The pre-approval will outline how much, based on your qualifications and personal credit ratings, the bank feels you can afford to borrow. By being pre-approved, you will then know in advance what funds you will have available in order to negotiate your purchase price.  Additionally, if the property is very desirable you can put in an offer without it being conditional on financing and then the vendors (or the party selling the property) may be more inclined to negotiate an offer of purchase with you.

There are many different kinds of mortgages a person can obtain.

A conventional mortgage is a mortgage that does not exceed 80% of the purchase price of the property. Accordingly, this type of mortgage does not need to be insured against default.

A high ratio mortgage is a loan that needs to be insured against loss by either Canada Mortgage and Housing Corporation (CMHC), a Federal Government Corporation, or GE Capital, a private insurer. If you don't have 20% of the lesser of (a) the purchase price, or (b) the appraised value of the property, your mortgage must be insured against default by a Mortgage Insurer. For information about premiums added to the mortgage amount, or the premiums paid at closing, please refer to CMHC Borrowing Costs.

For more information on mortgages and the services provided by Krol & Krol, contact Krol & Krol at 905.707.3370.