At its most basic a mortgage is the loan one would take out with a financial establishment in order to buy a house. Most Canadians with a mortgage take out these loans to borrow the money needed to buy their home. A business may even take out a mortgage to pay for their commercial space.
Mortgages in Canada, like most other Western countries, are arranged by banks and other financial lenders. Potential buyers have to provide mortgage lenders with evidence of how much they earn in a year, which is then used to determine how much they’ll be able to borrow from the bank or if they’ll be able to borrow at all.
Banks put a limit on how much they will lend, and the amount is directly related to the borrowers’ earnings or the total revenue for a business. Banks want to be sure that the borrower will be able to pay back the money lent to them without it being a financial strain on the individual.
Some banks are prepared to offer higher mortgages yet the borrowers may have to take the loan over a longer period of time, or have to pay it back at a higher rate of interest.
Lenders do offer a variety of different loans as every borrower has different needs. For example fixed rate mortgages where, for a time, payments to the bank stay the same and do not rise or fall with the altering interest rates. Some do special offers for first time buyers, including cash back once they begin repaying the bank, or offer a lower deposit on the home in order for them to afford the property.
Currently Canada seems keen to offer short term mortgages between three to ten years, especially in cities like Calgary and Montreal. While the monthly payments are higher, the total amount of money repaid is lower.
Canada has recently experienced an increase in the number of remortgages. These loans are popular with people that are aiming to take advantage of cheaper payments, or that want to increase the amount of money they have borrowed.
If you’re looking to get a first, or second, mortgage on your house but aren’t sure if you’ll be approved then be sure to check out how First & Second Mortgages can help.