There are several different types of mortgages.
Conventional Mortgage
Most banks and trust companies offer standard loans using the property
as security and require you to make a monthly blended payment including
principal and interest. Conventional mortgages require at least 25% of the
purchase price as a down payment.
High Ratio Mortgages
If your down payment is less than 25% you may still qualify for a mortgage,
but you will need mortgage insurance. Canada and Mortgage Housing Corporation
(CMHC), a federal crown corporation, and GE Capital Mortgage Insurance Company,
a private company, provide insurance for high ratio mortgages.
Assuming an Existing Mortgage
You take over the vendor’s mortgage as part of the price you pay
for the house. Assuming an existing mortgage is quick and saves you money
on the usual mortgage arrangement fees, such as appraisals and legal fees.
Vendor Take-Back Mortgages
The Seller underwrites part of the purchase, as a loan to be repaid by
the buyer. These are often used as second mortgages, to bridge any gaps
or to make the property more attractive to the buyer.
Open Mortgages
Open mortgages allow you to make extra payments on the principal, reducing
your borrowing costs. Because of the flexibility, interest rates for open
mortgages are a little higher.
Closed Mortgages
Closed mortgages have no flexibility; you must wait until the term is
up to pay your mortgage. However, interest rates for these mortgages are
generally lower.
