Here's a breakdown of the most common types of mortgages:
Conventional/Bank Mortgages: These require a minimum down payment of 20% of the purchase price, with no need for insurance against default. You're responsible for property appraisal and legal fees.
Low Down Payment Insured Mortgage: These mortgages, with down payments as low as 5%, must be insured against default, resulting in higher costs including insurance premiums.
Closed, Open & Convertible Mortgages: Closed mortgages lock in the interest rate for the full term, ideal for stable interest rates. Open mortgages offer flexibility for repayment without extra costs. Convertible mortgages provide security with the option to convert to a longer, closed mortgage without charges.
Fixed or Variable Rate Mortgage: Fixed-rate mortgages lock in the interest rate for the term, ensuring predictable payments. Variable-rate mortgages adjust with market fluctuations, potentially offering savings in low-rate environments.
Assumable Mortgage: Assuming the existing mortgage can help you save on typical mortgage fees like appraisal and CMHC fees. In Alberta, this option is available, allowing you to apply cash already paid toward the mortgage and resume payments. All assumable mortgages in Canada are qualified, which means that the buyer assuming the mortgage must still qualify for the loan. So just like a regular mortgage, you must meet the mortgage lender's requirements for things like income and debt to assume the mortgage.
Vendor Take Back (VTB): With a VTB, the vendor acts as a lender, holding all or part of the mortgage. This loan may offer lower rates than traditional bank rates.
Understanding the terms, payment schedules, and consequences of non-payment is crucial before signing any mortgage documents.
Consult with legal and financial professionals to ensure protection against surprises.