Mortgages are often the biggest debt that individuals incur in their lifetime and they usually take between 15 and 30 years of monthly payments. So, what is a mortgage? Mortgages are financial transactions wherein debtors charge their personal or real properties to creditors as security for their debt. The term is usually used for property purchases. The properties are then returned to the debtors on condition that they pay the debt within the stipulated period. In Canada, you have to pay a down payment upfront before you can get a mortgage. The down payment is subtracted from the total mortgage amount. For loans equal to or less than $500,000, the down payment is 5% of that amount. For amounts above $500,000,
the excess amount is multiplied by 10% and the figure added to $25,000. Before you can qualify for a mortgage, the lender requires you to go through a pre-approval process. This is where a mortgage broker like Approved Mortgage Brokers comes in because issues like the applicable interest rates, the loan duration, and how much you qualify for are discussed at this stage. You can get a fixed-rate or a variable-rate mortgage. Variable-rate mortgages are more popular in Canada since they allow for the fluctuation, either upwards or downwards, of the interest rate based on how the economy is doing. At Approved Mortgage Brokers, we will also help you choose between a fixed and a variable payment option. Fixed payment options are whereby you make a fixed monthly payment irrespective of interest rate changes while variable payment options are
dependent on the Canadian Central Bank interest rates. There are also “convertible” variable-rate mortgages where the creditor can shift to a fixed rate. We always advise our clients to go for fixed rates since this shields them from financial pressure. If you already have a mortgage and the mortgage term is near, a mortgage broker will help you negotiate for a lower interest rate. This could be after 1, 3, or 5 years within the amortization period.